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: **September 30, 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 past12 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 August
      25,
      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 September 30, 2005








INDEX


----------





Page




Part
      I.  Financial Information




Item
      1.  Consolidated Financial Statements 
.........................................................              
 2


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


Consolidated
      Statements of Operations and Comprehensive Loss
      ..........               
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 
.........              
12


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 September 30, 2005 and our unaudited
      consolidated statements of operations for the three month periods ended
      September 30, 2005 and 2004, and the unaudited consolidated statements of cash
      flows for the three month periods ended September 30, 2005 and 2004, are
      attached hereto and incorporated herein by this reference.






































































1










**SANGUI
                BIOTECH INTERNATIONAL,
                INC.**Consolidated
                Balance SheetsASSETSSeptember
                30,
            
            
            June
                30,2005
            
            
            2005CURRENT
                ASSETS
            
            
            (Unaudited)Cash
            
            
            
            $
            12,231
            
            
            $
            9,497Accounts
                receivable
            
            
            3,842
            
            
            
            4,300Inventory
            
            
            
            7,048
            
            
            
            7,063Prepaid
                expenses and other assets
            
            
            13,467
            
            
            
            17,421Total
              Current Assets
            
            
            36,588
            
            
            
            38,281FIXED
                ASSETS, NetProperty
                and
                equipment
            
            
            22,774
            
            
            
            33,608Total
              Fixed Assets
            
            
            22,774
            
            
            
            33,608OTHER
                ASSETSPatents
                and licenses, net
            
            
            0
            
            
            
            2,490Other
                miscellaneous assets
            
            
            45,842
            
            
            
            90,814Total
              Other Assets
            
            
            45,842
            
            
            
            93,304TOTAL
              ASSETS
            
            $
            105,204
            
            
            $
            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)September
                30,
            
            
            June
                30,2005
            
            
            2005(Unaudited)CURRENT
                LIABILITIESAccounts
                payable and accrued expenses
            
            $
            159,170
            
            
            $
            140,899Notes
                payable
            
            
            
            -
            
            
            
            24,132Total
                Current Liabilities
            
            
            159,170
            
            
            
            165,031TOTAL
                LIABILITIES, COMMITMENTS AND CONTINGENCIES
            
            
            159,170
            
            
            
            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
            
            
            
            1,986,398Treasury
                stock
            
            
            
            (82,357
            )
            
            
            (82,357
            )Accumulated
                other comprehensive income
            
            
            398,443
            
            
            
            383,407Accumulated
                deficit
            
            
            (21,177,550
            )
            
            
            (21,033,386
            )Total
                Stockholders' Equity (Deficit)
            
            
            (53,966
            )
            
            
            162TOTAL
                LIABILITIES AND STOCKHOLDERS'EQUITY
                (DEFICIT)
            
            $
            105,204
            
            
            $
            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 and Comprehensive Income(Unaudited)For
                the ThreeMonths
                EndedSeptember
                30,2005
            
            
            2004REVENUES
            
            $
            -
            
            
            $
            5,572COST
                OF SALES
            
            
            -
            
            
            
            3,902GROSS
                PROFIT
            
            
            -
            
            
            
            1,670OPERATING
                EXPENSESResearch
                and development
            
            
            11,557
            
            
            
            185,408Depreciation
                and amortization
            
            
            13,324
            
            
            
            17,072General
                and administrative
            
            
            118,021
            
            
            
            135,789Total
                Operating Expenses
            
            
            142,902
            
            
            
            338,269OPERATING
                LOSS
            
            
            (142,902
            )
            
            
            (336,599
            )OTHER
                INCOME (EXPENSE)Interest
                income
            
            
            -
            
            
            
            1,752Interest
                expense
            
            
            (1,816
            )
            
            
            -Other
                income (loss)
            
            
            554
            
            
            
            (2,107
            )Total
                Other Income (Expense)
            
            
            (1,262
            )
            
            
            (355
            )NET
                LOSS
            
            
            (144,164
            )
            
            
            (336,954
            )OTHER
                COMPREHENSIVE INCOMEForeign
                currency translation adjustments
            
            
            15,036
            
            
            
            6,848Total
                Other Comprehensive Income
            
            
            15,036
            
            
            
            6,848COMPREHENSIVE
                LOSS
            
            $
            (129,128
            )
            
            $
            (330,106
            )BASIC
                AND DILUTED LOSS PER SHARE
            
            $
            (0.00
            )
            
            $
            (0.01
            )WEIGHTED
                AVERAGE NUMBEROF
                SHARES OUTSTANDING
            
            
            47,998,254
            
            
            
            40,836,613


The
        accompanying condensed notes are an integral part of these interim consolidated
        financial statements.
  4








**SANGUI
                BIOTECH INTERNATIONAL,
                INC.**Consolidated
                Statements of Cash Flows(Unaudited)For
                the ThreeMonths
                EndedSeptember
                30,2005
            
            
            2004CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            
            $
            (144,164
            )
            
            $
            (336,954
            )Adjustments
                to reconcile net loss to net cashused
                by operating activities:Depreciation
                and amortization
            
            
            13,324
            
            
            
            17,072Common
                stock issued for services
            
            
            10,837
            
            
            
            43,500Changes
                in operating assets and liabilitiesDecrease
                in accounts receivable
            
            
            458
            
            
            
            20,829Decrease
                (Increase) in inventories
            
            
            15
            
            
            
            (15,759
            )Decrease
                in prepaid expenses and other assets
            
            
            48,926
            
            
            
            1,698Increase
                (decrease) in accounts payableand
                accrued expenses
            
            
            18,271
            
            
            
            (20,106
            )Net
              Cash Used by Operating Activities
            
            
            (52,333
            )
            
            
            (289,720
            )CASH
                FLOWS FROM INVESTING ACTIVITIES
            
            
            -
            
            
            
            -CASH
                FLOWS FROM FINANCING ACTIVITIESSale
                of common stock for cash
            
            
            64,163
            
            
            
            -Payment
                of notes payable
            
            
            (24,132
            )
            
            
            -Net
              Cash Provided by Financing Activities
            
            40,031
            
            
            
            -EFFECT
                OF EXCHANGE RATE CHANGES
            
            
            15,036
            
            
            
            (5,491
            )NET
                INCREASE (DECREASE) IN CASH
            
            
            2,734
            
            
            
            (295,211
            )CASH
                AT BEGINNING OF PERIOD
            
            
            9,497
            
            
            
            310,959CASH
                AT END OF PERIOD
            
            $
            12,231
            
            
            $
            15,748SUPPLIMENTAL
                DISCLOSURES OFCASH
                FLOW INFORMATIONCASH
                PAID FOR:Interest
            
            $
            1,816
            
            
            $
            -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 September 30, 2005 are
      not 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 ended September 30,
      2004 have been reclassified to conform to the three months ended September
      30,
      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 $21,177,550 as
      of September 30, 2005 and has been significantly reducing its working capital
      since June 30, 2004.  The Company incurred a net loss applicable to common
      stockholders of $144,164 and used cash in operating activities of $52,333 for
      the three months ended September 30, 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 September 30, 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 September 30,
      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 component of
      other comprehensive income (loss) is the change in the cumulative foreign
      currency translation adjustments and is recorded as a component of stockholders'
      equity (deficit).





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
      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
      September 30, 2005.





NOTE
      3 -
      STOCKHOLDERS' EQUITY





During
      the
      three months ended September 30, 2006, the Company issued 1,000,000 shares
      of
      common stock to an unrelated individual for $40,031 in cash, $10,837 in
      services, and $24,132 in payment of debts.





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.





On
      June 15,
      2005, SanguiBioTech GmbH was served with a lawsuit, Amtsgericht Witten, Case
      No.
      2 C 429/05.  The plaintiff is a supplier of packaging foils for
      certain medical products.  He claims payment of invoices amounting to
      approximately $ 8,500.  The Company had rejected the delivery of the
      goods covered by the invoices due to poor quality.  The claim was
      settled by order of the Court on September 7, 2005, whereby Sangui agreed to
      pay
      an amount of approximately $6,406, including court fees.






























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





Issuance
      of Common Stock





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





Loan
      Agreement with FID Esprit AG





On
      April 4,
      2006, the Company entered into a loan agreement with FID Esprit AG. 
Pursuant to the terms of the loan agreement, FID Esprit AG loaned the Company
      approximately $48,264 with interest of six percent per annum.  The Company
      has the option of paying the loan and interest in cash or with shares of
      SanguiBioTech AG common stock, its wholly-owned subsidiary, valued at 50% of
      the
      average Hamburg OTC trading price over the four weeks prior to
      repayment.





Loan
      Agreement with Feedback AG





On
      June 9,
      2006, the Company entered into a loan agreement with Feedback
      AG.  Pursuant to the terms of the loan agreement, Feedback AG loaned
      the Company approximately $96,527 with interest of six percent per
      annum.  The Company has the option of paying the loan and interest in cash
      or with shares of SanguiBioTech AG common stock, its wholly-owned subsidiary,
      valued at 50% of the average Hamburg OTC trading price over the four weeks
      prior
      to repayment.





Second
      Loan Agreement with Feedback AG




On
      July 21,
      2006, the Company entered into a second loan agreement with Feedback AG. 
Pursuant to the terms of the loan agreement, Feedback AG loaned the Company
      approximately $18,100 for the purpose of preparing a shareholders meeting. 
The interest on this loan is set at six percent per annum.  The Company is
      to pay the loan and interest off utilizing its common stock following the
      shareholders meeting, however, if a shareholders meeting has not been held
      as of
      July 30, 2007, then the loan and interest are due and payable in
      cash.


























10





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





NOTE
      5 –
SUBSEQUENT EVENTS (Continued)





Agreement
      with ERC Nano Med S.A. de C.V.





On
      October
      13, 2006, the Company entered into a Distribution, Collaboration, and
      Commercialization Agreement through its wholly owned subsidiary with ERC S.A.
      de
      C.V., a division of ERC Nano Med. of Mexico (“ERC”).  Under the terms
      of the agreement the Company is granting the exclusive distribution rights
      of
      its i) hemospray, ii) wound cleaner liquid gel, iii) chitoskin wound pads,
      and
      iv) bloodadditiv to ERC.  In return, ERC is to work with the various
      Mexican Health Authorities necessary to grant government approvals necessary
      for
      the products to be sold and distributed in Mexico.  All costs for
      obtaining the necessary approvals in Mexico are to be born by ERC.





Additional
      Loans




From
      January
      2006 to April 2007 the Company borrowed money from four separate European
      companies and their affiliates to supplement its ongoing operational cash
      flow.  The Company issued notes in exchange for cash pursuant to the
      following terms:  All notes are due and payable in the fifth
      anniversary of issuance at a rate of 5% simple interest.  The Company,
      in its sole discretion, has the right to convert these notes, including all
      unpaid principal and any interest thereon, into shares of the Company’s common
      stock at the rate of approximately $0.11 per share at any time prior to full
      repayment or on the Due Date.  The total amount borrowed under these notes
      was $512,959.





Letter
      of Intent with Tycoon Venture Capital





As
      of April
      9, 2007, the Company entered into a letter of intent with Tycoon Venture Capital
      & Investment Ltd., London, UK, according to which Tycoon intends to acquire
      a stake of 25% in the Company.  As part of the planned agreement Tycoon
      Venture Capital & Investment plans to offer the Company a mezzanine loan of
      up to approximately $ 9.15 million.





Letter
      of Intent with Tycoon Consulting




As
      of February 6, 2007, the Company and Tycoon Consulting (UK), Bristol, UK,
      entered into an agreement, according to which Tycoon agreed to undertake the
      marketing of Sangui cosmetics in several Arab countries, including Saudi Arabia,
      the United Arabian Emirates, Kuwait, Bahrain, Jordan andEgypt. Tycoon was granted
      exclusive
      distribution rights for the Company’s cosmetics for the region.  As of May
      23, 2007, Tycoon disclosed that it had signed contracts with Arab companies
      to
      further promote this venture.



























11







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.





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.


12





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 $1,693, or 4%, from June 30, 2005 to $36,588 at
      September 30, 2005. The decrease is primarily attributable to a decrease in
      prepaid expenses and other assets of $3,954. This decrease was partially offset
      by a $2,734 increase in cash during the period.




The
      Company's
      net property and equipment decreased $10,834, or 32% from June 30, 2005 to
      $22,774 at September 30, 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 $54,128. The primary decrease is caused by the Company's current
      period net loss of $144,164.




RESULTS
      OF OPERATIONS




Three
      months ended September 30, 2005 and 2004:




RESEARCH
      AND
      DEVELOPMENT. Research and development expenses decreased significantly
      to $11,557 in 2005 from $185,408 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 $118,021
      in
      2005 from $135,789 in 2004. This decrease is mainly attributed to the ongoing
      refocusing program and a reduction in staff.




DEPRECIATION
      AND AMORTIZATION. Depreciation decreased 12% to $13,324 in 2005 from $17,072
      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 $144,164,
      or $0.00 per common share, for the three months ended September 30, 2005,
      compared to $336,954, or $0.01 per common share, during the comparable period
      in
      2004.





LIQUIDITY
      AND CAPITAL RESOURCES




For
      the three
      months ended September 30, 2005, net cash used in operating activities decreased
      to $52,333 from $289,720 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 $122,582 at September 30, 2005, a decrease
      of
      $4,168 from June 30, 2005.  At September 30, 2005, the Company had
      cash of $12,231. 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




Subsequent
      to
      the period covered by this report, on June 15, 2005, SanguiBioTech GmbH was
      served with a lawsuit, Amtsgericht Witten, Case No. 2 C 429/05.  The
      plaintiff is a supplier of packaging foils for certain medical
      products.  He claims payment of invoices amounting to approximately $
      8,500.  The Company had rejected the delivery of the goods covered by
      the invoices due to poor quality.  The claim was settled by order of
      the Court on September 7, 2005, whereby Sangui agreed to pay an amount of
      approximately $6,406., including court fees.




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




During
      the
      three months ended September 30 2005, the Company issued 1,000,000 shares of
      common stock for cash of $40,031, payment of debt of $24,132 and services of
      $10,837.





Subsequent
      to
      September 30, 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




Sangui
      Directors Christpoh Ludz and Markus Volpers resigned effective February 7,
      2005.
      The Board appointed Thomas Striepe, the Vice President of Accounting and
      Controlling of Dr. Ludz, GmbH, Hamburg, as a director. The Board of Directors
      now consists of Wolfgang Barnikol, Joachim Lutz, Thomas Striepe and Joachim
      Fleing.




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:
              September 13,
              2007                             /s/  Wolfgang
              Barnikol
 By:
            Wolfgang Barnikol
 Chief
            Executive Officer and Chief Financial Officer






14