UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549


_______________________





FORM
      10-QSB




(Mark
      One)




[  X  ]   QUARTERLY
      REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
      ACT OF 1934




For
      Quarterly period Ended: **December 31, 2005**; or





[     
       ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
      THE SECURITIES EXCHANGE
      ACT OF 1934




For
      the transition period __________ to __________





Commission
      File Number: 0-21271


_________________________





**SANGUI
      BIOTECH INTERNATIONAL, INC.**


________________________________________________


(Exact
      name of Small Business Issuer as specified in its charter)





COLORADO                               
                
 84-1330732


______________________                            
      ___________


(State
      or
      other Jurisdiction
      of                              (I.R.S.
      Employer


Incorporation
      or
      Organization)                             Identification
      No.)








Alfred-Herrhausen-Str.
      44, 58455 Witten, Germany


_____________________________


(Address
      of principal executive offices)





011-49-2302-915-204


___________________________________


(Issuer's
      telephone number, including area code)




Check
      whether
      the issuer: (1) filed all reports required to be filed by Section 13 or 15(d)
      of
      the Exchange Act during the past 12 months (or for such shorter period that
      a
      registrant was required to file such reports), and (2) has been subject to
      such
      filing requirements for the past 90 days.  Yes o   No
x




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




The
      number of
      shares outstanding of the issuer's common stock, no par value, as of November
      28, 2007, was 50,000,000




Transitional
      Small Business Disclosure Format. Yes o   No
x











SANGUI
      BIOTECH INTERNATIONAL, INC.





Report
      on
      Form 10-QSB





For
      the
      Quarter Ended December 31, 2005








INDEX







Page




Part
      I.  Financial Information




Item
      1.  Consolidated Financial Statements


Consolidated
      Balance Sheets
      ..............................................................            
   2


Consolidated
      Statements of Operations
      ............................................               
4


Consolidated
      Statements of Cash Flows ...........................................
              
5


Notes
      to the
      Consolidated Financial Statements  ............................
               6





Item
      2.  Management's Discussion and Analysis or Plan of Operation 
.........              
11


Item
      3.  Controls and Procedures
      ..........................................................................              14




Part
      II.
      Other Information




Item
      1.  Legal Proceedings
      .....................................................................................              
14




Item
      2.  Unregistered Sales of Equity Securities and Use of Proceeds
      ...........              
14




Item
      3.  Defaults Upon Senior Securities
      ..............................................................              
14




Item
      4.  Submission of Matters to a Vote of Security Holders
      ..........................              
14




Item
      5.  Other Information
      ......................................................................................              
14




Item
      6.  Exhibits
      .........................................................................................................              
14
























ii










PART
      I -
      FINANCIAL INFORMATION





Item
      1
– Consolidated Financial Statements




The
      accompanying
      unaudited consolidated financial statements have been prepared in accordance
      with the instructions to Form 10-QSB pursuant to the rules and regulations
      of
      the Securities and Exchange Commission and, therefore, do not include all
      information and footnotes necessary for a complete presentation of our financial
      position, results of operations, cash flows, and stockholders' deficit in
      conformity with generally accepted accounting principles in the United States
      of
      America. In the opinion of management, all adjustments considered necessary
      for
      a fair presentation of the consolidated results of operations and financial
      position have been included and all such adjustments are of a normal recurring
      nature.




Our
      unaudited
      consolidated balance sheet as of December 31, 2005 and our unaudited
      consolidated statements of operations for the three month periods ended December
      31, 2005 and 2004, and the unaudited consolidated statements of cash flows
      for
      the three month periods ended December 31, 2005 and 2004, are attached hereto
      and incorporated herein by this reference.
























1







**SANGUI
                  BIOTECH INTERNATIONAL, INC.**Consolidated
                  Balance SheetsASSETSDecember
                  31,
              
              
              June
                  30,2005
              
              
              2005CURRENT
                  ASSETS
              
              
              (Unaudited)Cash
              
              
              
              $
              15,668
              
              
              $
              9,497Accounts
                  receivable
              
              
              3,778
              
              
              
              4,300Inventory
              
              
              
              7,193
              
              
              
              7,063Prepaid
                  expenses and other assets
              
              
              9,860
              
              
              
              17,421Total
                  Current Assets
              
              
              36,499
              
              
              
              38,281FIXED
                  ASSETS, NetProperty
                  and equipment
              
              
              14,229
              
              
              
              33,608Total
                  Fixed Assets
              
              
              14,229
              
              
              
              33,608OTHER
                  ASSETSPatents
                  and licenses, net
              
              
              -
              
              
              
              2,490Other
                  miscellaneous assets
              
              
              38,499
              
              
              
              90,814Total
                  Other Assets
              
              
              38,499
              
              
              
              93,304TOTAL
                  ASSETS
              
              $
              89,227
              
              
              $
              165,193
 
     The
        accompanying condensed notes are an integral part of these interim consolidated
        financial statements.
  2
  
  
 **SANGUI
                  BIOTECH INTERNATIONAL,
                  INC.**Consolidated
                  Balance Sheets (Continued)LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)December
                  31,
              
              
              June
                  30,2005
              
              
              2005(Unaudited)CURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses
              
              $
              165,402
              
              
              $
              140,899Notes
                  payable
              
              
              
              -
              
              
              
              24,132Total
                  Current Liabilities
              
              
              165,402
              
              
              
              165,031TOTAL
                  LIABILITIES
              
              
              165,402
              
              
              
              165,031STOCKHOLDERS'
                  EQUITY (DEFICIT)Preferred
                  stock, no par value; 5,000,000 sharesauthorized,
                  -0- shares issued and outstanding
              
              
              
              
              
              
              -Common
                  stock, no par value; 50,000,000 sharesauthorized,
                  48,503,749 and 47,503,749 sharesissued
                  and outstanding, respectively
              
              
              18,821,100
              
              
              
              18,746,100Additional
                  paid-in capital
              
              
              1,986,398
              
              
              
              1,986,398Stock
                  subscription payable
              
              
              112,417
              
              
              
              -Treasury
                  stock
              
              
              
              (82,357
              )
              
              
              (82,357
              )Accumulated
                  other comprehensive income
              
              
              396,294
              
              
              
              383,407Accumulated
                  deficit
              
              
              (21,310,027
              )
              
              
              (21,033,386
              )Total
                  Stockholders' Equity (Deficit)
              
              
              (76,175
              )
              
              
              162TOTAL
                  LIABILITIES AND STOCKHOLDERS'EQUITY
                  (DEFICIT)
              
              $
              89,227
              
              
              $
              165,193
 The
            accompanying condensed notes are an integral part of these interim consolidated
            financial statements.
 3
  **SANGUI
                  BIOTECH INTERNATIONAL, INC.**Consolidated
                  Statements of Operations(Unaudited)For
                  the Three
              
              
              For
                  the SixMonths
                  Ended
              
              
              Months
                  EndedDecember
                  31,
              
              
              December
                  31,2005
              
              
              2004
              
              
              2005
              
              
              2004REVENUES
              
              $
              53,990
              
              
              $
              5,177
              
              
              $
              53,990
              
              
              $
              10,749COST
                  OF SALES
              
              
              15,740
              
              
              
              3,726
              
              
              
              15,740
              
              
              
              7,628GROSS
                  PROFIT
              
              
              38,250
              
              
              
              1,451
              
              
              
              38,250
              
              
              
              3,121OPERATING
                  EXPENSESResearch
                  and development
              
              
              38,353
              
              
              
              138,549
              
              
              
              49,910
              
              
              
              323,957Depreciation
                  and amortization
              
              
              8,545
              
              
              
              16,133
              
              
              
              21,869
              
              
              
              33,205General
                  and administrative
              
              
              122,455
              
              
              
              147,412
              
              
              
              246,304
              
              
              
              282,994Total
                  Operating Expenses
              
              
              169,353
              
              
              
              302,094
              
              
              
              318,083
              
              
              
              640,156OPERATING
                  LOSS
              
              
              (131,103
              )
              
              
              (300,643
              )
              
              
              (279,833
              )
              
              
              (637,035
              )OTHER
                  INCOME (EXPENSE)Interest
                  income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,545Interest
                  expense
              
              
              (3,507
              )
              
              
              -
              
              
              
              (5,323
              )
              
              
              -Other
                  income (loss)
              
              
              7,961
              
              
              
              56,498
              
              
              
              8,515
              
              
              
              54,391Total
                  Other Income (Expense)
              
              
              4,454
              
              
              
              56,498
              
              
              
              3,192
              
              
              
              55,936NET
                  LOSS
              
              
              (126,649
              )
              
              
              (244,145
              )
              
              
              (276,641
              )
              
              
              (581,099
              )OTHER
                  COMPREHENSIVE INCOMEForeign
                  currency translation adjustments
              
              
              98,426
              
              
              
              100,117
              
              
              
              12,887
              
              
              
              106,965Unrealized
                  gain on marketable securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
                  Other Comprehensive Income
              
              
              98,426
              
              
              
              100,117
              
              
              
              12,887
              
              
              
              106,965COMPREHENSIVE
                  INCOME (LOSS)
              
              $
              (28,223
              )
              
              $
              (144,028
              )
              
              $
              (263,754
              )
              
              $
              (474,134
              )BASIC
                  AND DILUTED LOSSPER
                  SHARE
              
              $
              (0.00
              )
              
              $
              (0.01
              )
              
              $
              (0.01
              )
              
              $
              (0.01
              )WEIGHTED
                  AVERAGE NUMBEROF
                  SHARES OUTSTANDING
              
              
              48,503,749
              
              
              
              43,191,613
              
              
              
              48,248,314
              
              
              
              42,014,113
 The
            accompanying condensed notes are an integral part of these interim consolidated
            financial statements.
  4
 
 **SANGUI
                  BIOTECH INTERNATIONAL, INC.**Statements
                  of Cash Flows(Unaudited)For
                  the SixMonths
                  EndedDecember
                  31,2005
              
              
              2004CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              
              $
              (276,641
              )
              
              $
              (581,099
              )Adjustments
                  to reconcile net loss to net cashused
                  by operating activities:Depreciation,
                  depletion and amortization
              
              
              21,869
              
              
              
              33,205Common
                  stock issued for services
              
              
              10,837
              
              
              
              82,625Changes
                  in operating assets and liabilitiesDecrease
                  in accounts receivable
              
              
              522
              
              
              
              27,346Decrease
                  (Increase) in inventories
              
              
              (130
              )
              
              
              -Decrease
                  in prepaid expenses and other assets
              
              
              59,876
              
              
              
              83,651Increase
                  in accounts payable and accrued expenses
              
              
              24,503
              
              
              
              23,000Net
                Cash Used by Operating Activities
              
              
              (159,164
              )
              
              
              (331,272
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchase
                  of fixed assets
              
              
              -
              
              
              
              -Net
                Cash Used by Investing Activities
              
              
              -
              
              
              
              -CASH
                  FLOWS FROM FINANCING ACTIVITIESPurchase
                  of treasury stock
              
              
              -
              
              
              
              (126,916
              )Sale
                  of common stock for cash
              
              
              152,448
              
              
              
              100,000Net
                Cash Provided by Financing Activities
              
              
              152,448
              
              
              
              (26,916
              )EFFECT
                  OF EXCHANGE RATE CHANGES
              
              
              12,887
              
              
              
              85,628NET
                  DECREASE IN CASH
              
              
              6,171
              
              
              
              (272,560
              )CASH
                  AT BEGINNING OF PERIOD
              
              
              9,497
              
              
              
              310,959CASH
                  AT END OF PERIOD
              
              $
              15,668
              
              
              $
              38,399SUPPLIMENTAL
                  DISCLOSURES OFCASH
                  FLOW INFORMATIONCASH
                  PAID FOR:Interest
              
              $
              5,322
              
              
              $
              -Income
                  Taxes
              
              $
              -
              
              
              $
              -NON
                  CASH FINANCING ACTIVITIES:Common
                  stock issued for debt
              
              $
              24,132
              
              
              $
              -




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




5










**SANGUI
            BIOTECH INTERNATIONAL,
            INC.**
 Notes
            to
            the Consolidated Financial
            Statements







NOTE
      1 -
      BASIS OF PRESENTATION





The
      accompanying consolidated financial statements have been prepared without audit
      in accordance with accounting principles generally accepted in the United States
      of America for interim financial information and with the instructions to Form
      10-QSB and Item 301 of Regulation S-B. Certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with accounting principles generally accepted in the United States of America
      have been condensed or omitted pursuant to such rules and regulations. The
      unaudited consolidated financial statements and notes should, therefore, be
      read
      in conjunction with the consolidated financial statements and notes thereto
      in
      the Company's Form 10-KSB for the year ended June 30, 2005. In the opinion
      of
      management, all adjustments (consisting of normal and recurring adjustments)
      considered necessary for a fair presentation, have been included. The results
      of
      operations for the three-month period ended December 31, 2005 are not
      necessarily indicative of the results that may be expected for the full fiscal
      year ending June 30, 2006.





NOTE
      2 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature
      of Business





Sangui
      Biotech International, Inc., incorporated in Colorado in 1995, and its wholly
      owned subsidiaries, Sangui Biotech, Inc., SanguiBioTech AG, GlukoMediTech AG,
      and Sangui BioTech PTE Ltd., (collectively, the "Company") have been engaged
      in
      the research, development, manufacture, and sales of medical and cosmetic
      products.





On
      June 30,
      2003, GlukoMediTech AG ("Gluko AG") was merged into Sangui BioTech AG ("Sangui
      AG"). Effective November 4, 2003, Sangui AG was converted into Sangui BioTech
      GmbH (Sangui GmbH). After completion of the restructuring, Sangui GmbH, which
      is
      headquartered in Witten, Germany, is engaged in the development of artificial
      oxygen carriers (external applications of hemoglobin, blood substitutes and
      blood additives) as well as in the development of glucose implant
      sensors.





The
      operations of Sangui BioTech, Inc. and Sangui BioTech PTE Ltd Singapore, two
      former wholly-owned subsidiaries, were discontinued and dissolved during
      2002.





The
      operations of Sangui BioTech, Inc. ("Sangui USA") were discontinued during
      2002
      upon the sale of its in vitro immunodiagnostics business and the subsequent
      merger of Sangui USA with and into the parent company, Sangui BioTech
      International, Inc., effective December 31, 2002. Sangui BioTech PTE Ltd
      ("Sangui Singapore") was a regional office for the Company that carried out
      research and development projects in conjunction with Sangui GmbH and Sangui
      Singapore. The Company discontinued the operations of Sangui Singapore in August
      2002. The Singapore office was closed effective December 31, 2002.





Consolidation





The
      consolidated financial statements include the accounts of Sangui BioTech
      International, Inc. and its wholly owned subsidiaries. All significant
      intercompany accounts and transactions have been eliminated in consolidation.
      Certain amounts in the three months and six months ended December 31, 2004
      have
      been reclassified to conform to the three and six months ended December 31,
      2005
      presentation. These reclassifications have no effect on previously reported
      net
      loss.




6







**SANGUI
          BIOTECH INTERNATIONAL,
          INC.**
 Notes
          to
          the Consolidated Financial
          Statements








NOTE
      2 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Foreign
      Currency Translation





Assets
      and
      liabilities of the Company's foreign operations are translated into U.S. dollars
      at period-end exchange rates. Net exchange gains or losses resulting from such
      translation are excluded from net loss but are included in comprehensive income
      (loss) and accumulated in a separate component of stockholders' equity. Income
      and expenses are translated at weighted average exchange rates for the
      period.





Risk
      and Uncertainties





The
      Company's
      line of future pharmaceutical products (artificial oxygen carriers or blood
      substitute and additives) and in vivo biosensors (glucose implant sensor) being
      developed by Sangui GmbH, are deemed as medical devices or biologics, and as
      such are governed by the Federal Food and Drug and Cosmetics Act and by the
      regulations of state agencies and various foreign government agencies. The
      pharmaceutical and biosensor products, under development in Germany, will be
      subject to more stringent regulatory requirements, because they are in vivo
      products for humans. The Company and its subsidiaries have no experience in
      obtaining regulatory clearance on these types of products. Therefore, the
      Company will be subject to the risks of delays in obtaining or failing to obtain
      regulatory clearance.





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern, which contemplates, among other
      things, the realization of assets and satisfaction of liabilities in the normal
      course of business. The Company has accumulated deficit of $21,310,027 as of
      December 31, 2005 and has been significantly reducing its working capital since
      June 30, 2004. The Company incurred a net loss applicable to common stockholders
      of $276,641 during the six months ended December 31, 2005 and used cash in
      operating activities of $159,164 for the six months ended December 31, 2005.
      These conditions raise substantial doubt about the Company's ability to continue
      as a going concern. The Company expects to continue to incur significant capital
      expenses in pursuing its business plan to market its products and expand its
      product line, while obtaining additional financing through stock offerings
      or
      other feasible financing alternatives. In order for the Company to continue
      its
      operations at its existing levels, the Company will require significant
      additional funds over the next twelve months. Therefore, the Company is
      dependent on funds raised through equity or debt offerings. Additional financing
      may not be available on terms favorable to the Company, or at all. If these
      funds are not available the Company may not be able to execute its business
      plan
      or take advantage of business opportunities. The ability of the Company to
      obtain such additional financing and to achieve its operating goals is
      uncertain. In the event that the Company does not obtain additional capital
      or
      is not able to increase cash flow through the increase of sales, there is a
      substantial doubt of its being able to continue as a going concern. The
      accompanying condensed consolidated financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.





Cash
      and Cash Equivalents





The
      Company
      maintains its cash in bank accounts in Germany. Cash and cash equivalents
      include time deposits for which the Company has no requirements for compensating
      balances. The Company has not experienced any losses in its uninsured bank
      accounts.  At December 31, 2005 the Company had no cash
      equivalents.




7








**SANGUI
          BIOTECH INTERNATIONAL,
          INC.**
 Notes
          to
          the Consolidated Financial
          Statements




NOTE
      2 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Revenue
      Recognition




Revenue
      is
      recognized when the sales amount is determined, shipment of goods to the
      customer has occurred and collection is reasonably assured. Product is shipped
      FOB origination.





Research
      and Development




Research
      and
      development costs are charged to operations as they are
      incurred.  Legal fees and other direct costs incurred in obtaining and
      protecting patents are expensed as incurred.





Basic
      and Diluted Earnings (Loss) Per Common Share




Basic
      earnings (loss) per common share is computed by dividing income (loss) available
      to common stockholders by the weighted average number of common shares
      outstanding during the period of computation. Diluted earnings (loss) per share
      gives effect to all potential dilutive common shares outstanding during the
      period of compensation. The computation of diluted earnings (loss) per share
      does not assume conversion, exercise or contingent exercise of securities that
      would have an antidilutive effect on earnings. As of December 31, 2005 and
      2004,
      the Company had no potentially dilutive securities that would affect the loss
      per share if they were to be dilutive.





Comprehensive
      Income (Loss)




Total
      comprehensive income (loss) represents the net change in stockholders' equity
      during a period from sources other than transactions with stockholders and
      as
      such, includes net earnings (loss). For the Company, the components of other
      comprehensive income (loss) are the changes in the cumulative foreign currency
      translation adjustments and unrealized gains (losses) on marketable securities
      and are recorded as components of stockholders' equity.





New
      Accounting Pronouncements




In
      December
      2004, the FASB issued SFAS No. 123R "Share Based Payment". This statement is
      a
      revision of SFAS Statement No. 123, "Accounting for Stock-Based Compensation"
      and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
      and its related implementation guidance. SFAS 123R addresses all forms of share
      based payment ("SBP") awards, including shares issued under employee stock
      purchase plans, stock options, restricted stock and stock appreciation rights.
      Under SFAS 123R, SBP awards result in a cost that will be measured at fair
      value
      on the awards' grant date, based on the estimated number of awards that are
      expected to vest and will be reflected as compensation cost in the historical
      financial statements. This statement is effective for public entities as of
      the
      beginning of the first interim or annual reporting period that begins after
      June
      15, 2005.




In
      May 2005,
      the FASB issued Statement of Financial Accounting Standards No.
      154*“Accounting Changes and Error Corrections, an amendment of APB Opinion
      20
      and FASB Statement No. 3,”* which changes the requirements for accounting
      for and reporting on a change in accounting principle. This statement is
      effective for accounting changes and corrections of errors made in fiscal years
      beginning after December 15, 2005. We believe that the adoption of SFAS No.
      154
      will not have a material impact on our results of operations.




8









**SANGUI
          BIOTECH INTERNATIONAL,
          INC.**
 Notes
          to
          the Consolidated Financial
          Statements




NOTE
      2 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





New
      Accounting Pronouncements (Continued)




In
      March
      2006, the FASB issued SFAS No. 156*“Accounting for Servicing of Financial
      Assets, an amendment of FASB No. 140,”* which modifies the accounting for
      and reporting of servicing asset and servicing liabilities. This statement
      is
      effective as of the beginning of our first fiscal year that begins after
      September 15, 2006. SFAS No. 156 is not currently applicable to the company
      and,
      we believe that the adoption of SFAS No. 156 will not have a material impact
      on
      our results of operations.




In
      June 2006,
      the FASB issued Financial Interpretation No. (FIN) 48, “*Accounting for
      Uncertainty in Income Taxes - an interpretation of FASB Statement 109*.” FIN
      48 prescribes a recognition threshold and a measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. This interpretation also provides guidance
      on de-recognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. This interpretation is effective for fiscal
      years beginning after December 15, 2006. The Company is currently evaluating
      the
      impact of applying the various provisions of FIN 48.




In
      September
      2006, the FASB issued SFAS No. 157, “*Fair Value Measurements*,” that
      provides guidance for using fair value to measure assets and liabilities. Under
      SFAS 157, fair value refers to the price that would be received to sell an
      asset
      or paid to transfer a liability in an orderly transaction between market
      participants in the market in which the reporting entity transacts. SFAS 157
      establishes a fair value hierarchy that prioritizes the information used to
      develop the assumptions that market participants would use when pricing the
      asset or liability. The fair value hierarchy gives the highest priority to
      quoted prices in active markets and the lowest priority to unobservable data.
      In
      addition, SFAS 157 requires that fair value measurements be separately disclosed
      by level within the fair value hierarchy. This standard will be effective for
      financial statements issued for fiscal periods beginning after November 15,
      2007
      and interim periods within those fiscal years. SFAS 157 had no effect on the
      Company’s financial statements for the period ended December 31,
      2005.





NOTE
      3 -
      STOCKHOLDERS' EQUITY





During
      the
      six months ended December 31, 2006, the Company issued 1,000,000 shares of
      common stock for cash of $40,071, debt of $24,132 and services of $10,837.
      In
      addition, the Company received $112,417 in cash pertaining to subscriptions
      payable.





NOTE
      4 -
      COMMITMENTS AND CONTINGENCIES





Litigation





The
      Company
      may, from time to time, be involved in various legal disputes resulting from
      the
      ordinary course of operating its business. Management is currently not able
      to
      predict the outcome of any such cases. However, management believes that the
      amount of ultimate liability, if any, with respect to such actions will not
      have
      a material effect on the Company's financial position or results of
      operations.






9











**SANGUI
          BIOTECH INTERNATIONAL,
          INC.**
 Notes
          to
          the Consolidated Financial
          Statements








NOTE
      4 -
      COMMITMENTS AND CONTINGENCIES (Continued)





Indemnities
      and Guarantees





During
      the
      normal course of business, the Company has made certain indemnities and
      guarantees under which it may be required to make payments in relation to
      certain transactions. These indemnities include certain agreements with the
      Company's officers, under which the Company may be required to indemnify such
      person for liabilities arising out of their employment relationship. The
      duration of these indemnities and guarantees varies and, in certain cases,
      is
      indefinite. The majority of these indemnities and guarantees do not provide
      for
      any limitation of the maximum potential future payments the Company could be
      obligated to make. Historically, the Company has not been obligated to make
      significant payments for these obligations and no liabilities have been recorded
      for these indemnities and guarantees in the accompanying consolidated balance
      sheet.





NOTE
      5 –
SUBSEQUENT EVENTS





In
      January
      2006 the Company sold 1,495,960 shares of its common stock to an independent
      investor yielding a cash inflow of $135,758.






10








ITEM
        2 -
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS
 
 Forward-looking
        Statements
  The
        following
        discussion of our financial condition and results of operations should be
        read
        in conjunction with the consolidated financial statements and the related
        notes
        thereto included elsewhere in this quarterly report. Some of the information
        in
        this quarterly report contains forward-looking statements, including statements
        related to anticipated operating results, margins, growth, financial resources,
        capital requirements, adequacy of the Company's financial resources, trends
        in
        spending on research and development, the development of new markets, the
        development, regulatory approval, manufacture, distribution, and commercial
        acceptance of new products, and future product development efforts. Investors
        are cautioned that forward-looking statements involve risks and uncertainties,
        which may affect our business and prospects, including but not limited to,
        the
        Company's expected need for additional funding and the uncertainty of receiving
        the additional funding, changes in economic and market conditions, acceptance
        of
        our products by the health care and reimbursement communities, new development
        of competitive products and treatments, administrative and regulatory approval
        and related considerations, health care legislation and regulation, and other
        factors discussed in our filings with the Securities and Exchange
        Commission.
 
 GENERAL
  The
        Company's
        mission is the development of novel and proprietary pharmaceutical, medical
        and
        cosmetic products.  The Company develops its products through its
        wholly owned German subsidiary Sangui GmbH.  The Company is seeking to
        market and sell some or all of their products through partnerships with industry
        partners.
 
 The
        focus of
        Sangui GmbH has been the development of oxygen carriers capable of providing
        oxygen transport in humans in the event of acute and/or chronic lack of oxygen
        dueto arterial occlusion, anaemia or blood loss whether due to surgery, trauma,
        or other causes.  Sangui GmbH has thus far focused its development and
        commercialization efforts of such artificial oxygen carriers by reproducing
        and
        synthesizing polymers out of native hemoglobin of defined molecular
        sizes.  Sangui GmbH, has in addition developed external applications
        of oxygen transporters in the medical and cosmetic fields in the form of
        gels
        and emulsions for the regeneration of the skin
 
 Sangui
        GmbH
        holds the exclusive distribution rights for Chitoskin wound pads for the
        European Union and various other countries.  Sangui GmbH has filed a
        patent cooperation treatment applications (“PCT”) for the production and use of
        improved Chitoskin wound pads using gelatine instead of collagen as the carrier
        substance.
 
 ARTIFICIAL
        OXYGEN CARRIERS
  Sangui
        GmbH
        develops several products based on polymers of purified natural porcine
        hemoglobin with oxygen carrying abilities that are similar to native
        hemoglobin.  These are (1) oxygen carrying blood additives and (2)
        oxygen carrying blood volume substitutes.
  In
        December
        1997, Sangui GmbH decided that porcine hemoglobin should be used as the basic
        material for its artificial oxygen carriers.  In March 1999, Sangui
        GmbH decided which hemoglobin hyperpolymer would go into preclinical
        investigation and that glutaraldehyde would be utilized as a cross linker,
        and
        further that the polymer hemoglobin be chemically masked to prevent protein
        interaction in blood plasma.  The fine adjustment of the molecular
        formula of the artificial oxygen carriers - optimized for laboratory scale
        production - was finalized in the summer of 2000.
  The
        experiments completed in Sangui GmbH’s laboratories demonstrated that it is
        possible to polymerize hemoglobins isolated from porcine blood resulting
        in huge
        soluble molecules, so-called hyperpolymers.  In August 2000, Sangui
        GmbH finalized its work on the pharmaceutical formulation of the oxygen carrier
        for laboratory scale.  In February 2001 a pilot production in a
        laboratory scale was carried out in SGBI's clean room.  The resulting
        product was applied in single volunteers in pilot self-experiments.
  The
        blood
        additives and blood substitute projects were halted in 2003 due to the lack
        of
        financing for the pre-clinical test phase of the blood additives.  In
        October, 2006, subsequent to the period covered by this report, a contract
        was
        entered into between Sangui GmbH and ERC Nano Med S.A. de C.V. of Monterrey,
        Mexico (“ERC”), which provides that ERC will establish a production facility in
        Mexico to produce sufficient quantities of the blood additive.  In
        cooperation with the medical faculty of Monterrey University and the Mexican
        National Health Organizations, ERC will initiate all necessary steps to begin
        the pre-clinical test phase for the products as soon as possible.  It
        is anticipated that this will lead to the FDA authorization process in due
        course. The authorization process will be managed in cooperation with
        Medicoforum group of Hannover, Germany, a company specializing in international
        pharmaceutical and medical product authorizations,
  According
        to
        regulatory requirements, all drugs must complete preclinical and clinical
        trials
        before approval (e.g. Federal Drug Administration approval, see Certain Business
        Risks below) and market launch.  The Company’s management believes
        that the European and FDA approval process will take at a minimum several
        years
        to complete.
 11
 NANO
        FORMULATIONS FOR THE REGENERATION OF THE SKIN
  Healthy
        skin
        is supplied with oxygen both from the inside as well as through diffusion
        from
        the outside.  A lack of oxygen will cause degenerative alterations,
        ranging from premature aging, to surface damage, and even as extensive as
        causing open wounds.  The cause for the lack of oxygen may be a part
        of the normal aging process, but it may also be caused by burns, radiation,
        trauma, or a medical condition.  Impairment of the blood flow, for
        example caused by diabetes mellitus or by chronic venous insufficiency, can
        also
        lead to insufficient oxygen supply and the resulting skin damage.
  The
        nano-emulsion-based preparations now being sold by Sangui GmbH have been
        designed to supporting the regeneration of the skin by improving its oxygen
        supply.  The products Sangui GmbH are currently focussing on are an
        anti-aging formulation and treatment and an anti-cellulite formulation for
        the
        cosmetics market.  The products were thoroughly tested by an
        independent research institute and received top marks for skin moisturization,
        and enhanced skin elasticity, respectively.
  Sangui’s
        cosmetic business model is reliant upon cooperation with its manufacturing
        and
        distribution partners.  Sangui has its various formulations produced
        by a contract manufacturer and sells quantities of the products either in
        bulk
        or in customized private label packaging, as requested.  In addition,
        Sangui started to sell its cosmetic products under its own brand “Pure
        MO2isture” via an internet shop as of mid September, 2006.
  Sales
        of the
        anti-cellulite products started subsequent to this report in August, 2005
        via
        two German TV shop programs.  Sales figures in this distribution
        channel are stable, according to information provided by our distribution
        partner.  Additionally, distribution partners in Argentina and Mexico
        have purchased launch quantities in November, 2005, and July, 2006,
        respectively.
  CHITOSKIN
        WOUND PADS
  In
        March,
        2005, SanguiBioTech GmbH was awarded the CE mark for this
        product.  The CE mark authorizes the company to distribute and sell
        this medical product in the member countries of the European
        Union.  At the same time Sangui GmbH successfully passed the ISO
        9001:2000 (General Quality Management System) and ISO 13485:2003 (Quality
        Management System Medical Products) audits, and obtained the respective
        certifications.  The “Chitoskin” trademark was already granted to the
        company for the European countries effective November 1, 2004.
  Karl
        Beese
        GmbH, a leading German vendor and distributor of hospital supplies began
        marketing and distributing the wound pad product in August, 2005, and has
        placed
        several subsequent orders with the company.  In addition, Karl Beese
        will deliver large quantities of the wound pad product to a Czech distribution
        partner through summer 2006.
 
 FINANCIAL
        POSITION
  The
        Company's
        current assets decreased approximately $1,782, or 5%, from June 30, 2005
        to
        approximately $36,499 at December 31, 2005. The decrease is primarily
        attributable to a decrease in prepaid expenses and other assets of approximately
        $7,561. This decrease was partially offset by an $6,171 increase in cash
        during
        the period.
  The
        Company's
        net property and equipment decreased approximately $19,379, or 58% from June
        30,
        2005 to approximately $14,229 at December 31, 2005. The decrease is primarily
        attributable to current period depreciation.
  The
        Company
        funded its operations primarily through its existing cash reserves and cash
        received from the sale of common stock. The Company's stockholders' equity
        decreased approximately $76,337. The primary decrease is caused by the Company's
        current period net loss of approximately $276,641
  RESULTS
        OF OPERATIONS
  Three
        months ended December 31, 2005 and 2004:
  RESEARCH
        AND
        DEVELOPMENT. Research and development expenses decreased $100,196 to
        approximately $38,353 in 2005 from approximately $138,549 in 2004. The decrease
        is mainly attributed to the Company lacking the requisite funding and a
        reduction in staff. The Company is seeking additional sources to provide
        financing for additional research and development.
  GENERAL
        AND
        ADMINISTRATIVE. General and administrative expenses decreased 17% to
        approximately $122,455 in 2005 from approximately $147,412 in 2004. This
        decrease is mainly attributed to the ongoing refocusing program, and a reduction
        in staff.
  DEPRECIATION
        AND AMORTIZATION. Depreciation decreased $7,588 to approximately $8,545 in
        2005
        from approximately $16,133 in 2004. This decrease is mainly attributed to
        the
        ongoing restructuring of Sangui GmbH.
  NET
        LOSS. As
        a result of the above factors, the Company's consolidated net loss was
        approximately $126,649, or approximately $(0.00) per common share, for the
        three
        months ended December 31, 2005, compared to approximately $244,145, or $0.01
        per
        common share, during the comparable period in 2004.
 12
  Six
        months ended December 31, 2005 and 2004:
  RESEARCH
        AND
        DEVELOPMENT. Research and development expenses decreased $274,047 to
        approximately $49,910 in 2005 from approximately $323,957 in 2004. The decrease
        is mainly attributed to the Company lacking the requisite funding, and a
        reduction in staff.  The Company is seeking additional sources to
        provide financing for additional research and development.
  GENERAL
        AND
        ADMINISTRATIVE. General and administrative expenses decreased 13% to
        approximately $246,304 in 2005 from approximately $282,994 in 2004. This
        decrease is mainly attributed to the ongoing refocusing program, and a reduction
        in staff.
  DEPRECIATION
        AND AMORTIZATION. Depreciation and amortization decreased $11,336 to
        approximately $21,869 in 2005 from approximately $33,205 in 2004. This decrease
        is mainly attributed to the ongoing restructuring of Sangui GmbH.
  NET
        LOSS. As
        a result of the above factors, the Company's consolidated net loss was
        approximately $276,641, or approximately $(0.01) per common share, for the
        six
        months ended December 31, 2005, compared to approximately $581,089, or $0.01
        per
        common share, during the comparable period in 2004.
  LIQUIDITY
        AND CAPITAL RESOURCES
  For
        the six
        months ended December 31, 2005, net cash used in operating activities decreased
        to approximately $159,164, from approximately $331,272 in the corresponding
        period in 2004, primarily related to a decrease in the Company's consolidated
        net loss as a result of the ongoing refocusing program.
  The
        Company
        had a working capital deficit of approximately $128,903 at December 31, 2005,
        an
        increase of approximately $2,153 from June 30, 2004 due primarily to the
        Company's net loss for the three-month period.  At December 31, 2005,
        the Company had cash of approximately $15,668. 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.
  13







ITEM
      3
      - CONTROLS AND PROCEDURES




(a)
      Evaluation of disclosure controls and procedures. Our principal executive
      officer and principal financial officer have evaluated the effectiveness of
      our
      disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
      under the Exchange Act), as of a date within 90 days of the filing date of
      this
      Quarterly Report on Form 10-QSB. Based on such evaluation, they have concluded
      that as of such date, our disclosure controls and procedures are have not been
      effective or designed to ensure that information required to be disclosed by
      us
      in reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in applicable SEC
      rules and forms.  Our principal executive officer and principal
      financial officer are currently working to streamline our disclosure controls
      and procedures, so as to adequately comply with such SEC rules and
      forms.




(b)
      Changes
      in internal controls. There were no significant changes in our internal controls
      or in other factors that could significantly affect these controls subsequent
      to
      the date of evaluation by our principal executive officer and principal
      financial officer.




PART
      II - OTHER INFORMATION





ITEM
      1
      - LEGAL PROCEEDINGS




The
      Company
      is not aware of pending claims or assessments which may have a material adverse
      impact on the Company’s financial position or results of
      operations.


ITEM
      2
      - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




Subsequent
      to
      December 31, 2005 the Company issued 1,495,960 shares of common stock for a
      cash
      inflow of $135,758.





ITEM
      3
      - DEFAULTS UPON SENIOR SECURITIES




None.





ITEM
      4
      - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS




None.





ITEM
      5
      - OTHER INFORMATION




None.




ITEM
      6
      - EXHIBITS




31.1
      Certification Pursuant to Rule 13a-14(a) and 15d-14(a), filed
      herewith.




32.1  Certification
      Pursuant to Section 1350 of Title 18 of the United States Code, filed
      herewith.




SIGNATURES





Pursuant
      to
      the requirements of the Securities Exchange Act of 1934, the Registrant has
      duly
      caused this report to be signed on its behalf by the undersigned thereunto
      duly
      authorized.





SANGUI
      BIOTECH INTERNATIONAL,
      INC.





Date:
              November 30,
              2007                             /s/  Wolfgang
              Barnikol
 By:
            Wolfgang Barnikol
 Chief
            Executive Officer and Chief Financial Officer






14