UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON, D.C.
20549


_______________________





FORM
10-KSB





ANNUAL REPORT UNDER SECTION 13 OR 15
(d)


OF THE SECURITIES EXCHANGE ACT OF
1934





For
the fiscal year ended: June 30, 2008




Commission File Number:
0-21271


_______________________





SANGUI
BIOTECH INTERNATIONAL, INC.


(Name of
Small Business Issuer in Its Charter)




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





Alfred
      Herrhausen Street 44, Witten
      Germany
              58455(Address
      of principal executive offices)
              (Zip
      Code)


49
(2302) 915-200


(Issuer’s
Telephone Number, including Area Code)




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




None




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




Common
Stock, no par value




Check whether the
issuer is not required to file reports pursuant to Section 13 or 15(d) of the
Exchange Act.   o




Check whether the issuer:
(1) filed all reports required to be filed by Section 13 or 15 (d) of the
Securities 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   xNo  
o




Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-B is
contained in this form, and no disclosure will be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.   o




Indicate by
check mark whether the Registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).  Yes   oNo   x




The Issuer's
revenues for the most recent fiscal year ended June 30, 2008, were approximately
$207,176.




The aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the Registrant on October 14, 2008 based upon the average of the bid and
ask price of the common stock on the pinksheets.com for such date, was
approximately $4,775,000.




The number of
shares of the Registrant's common stock issued and outstanding on October 14,
2008 was 50,000,000.




Transitional Small
Business Disclosure Format.   Yes   o  No  
x





Table
of Contents


PART
      I
                  
                  
                  PageITEM 1
                  Description of Business
                  
                  
                  1ITEM 2
                  Description of Property
                  
                  
                  11ITEM 3
                  Legal Proceedings
                  
                  
                  11ITEM 4
                  Submission of Matters to a Vote of Security
      Holders
                  
                  
                  11PART
      IIITEM 5
                  Market for Common Equity, Related Stockholder Matters and
      Small Business Issuer Purchases of Equity Securities
                  
                  
                  11ITEM 6
                  Management’s Discussion and Analysis or Plan of
      Operation
                  
                  
                  12ITEM 7
                  Financial Statements
                  
                  
                  14Independent Auditors’ Reports
                  
                  
                  15Consolidated Balance Sheet
                  
                  
                  16Consolidated Statements of Operations
                  
                  
                  18Consolidated Statements of Stockholders’
      Equity
                  
                  
                  19Consolidated Statements of Cash Flows
                  
                  
                  20Notes to Consolidated Financial
    Statements
                  
                  
                  21ITEM 8
                  Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure
                  
                  
                  31ITEM 8A
                  Controls and Procedures
                  
                  
                  31ITEM 8B
                  Other Information
                  
                  
                  31PART
      IIIITEM 9
                  Directors, Executive Officers, Promoters and Control
      Persons; Compliance with Section 16(a) of the Exchange
    Act
                  
                  
                  33ITEM 10
                  Executive Compensation
                  
                  
                  35ITEM 11
                  Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholders Matters
                  
                  
                  37ITEM 12
                  Certain Relationships and Related
      Transactions
                  
                  
                  38ITEM 13
                  Exhibits
                  
                  
                  39ITEM 14
                  Principal Accountant Fees and Services
                  
                  
                  40




i





CAUTIONARY
STATEMENT




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




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


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


·the
uncertainty of consumer demand for our product;


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


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


·the
effect of changing economic conditions;


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


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




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






ii





PART
1




ITEM 1.DESCRIPTION
OF BUSINESS




HISTORY




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




On
March 30, 2000, SGBI acquired all the outstanding common stock of Felnam
Investments, Inc., a Nevada corporation (Felnam).  The transaction was
funded through the issuance of 100,000 shares of SGBI's stock valued at $0 per
share due to SGBI treating the transaction as a recapitalization of
SGBI.  In conjunction with the transaction, SGBI incurred
approximately $180,000 of transaction costs that were charged to
operations.




Until
the end of fiscal year 2002, SGBI's business operations were conducted through
its four wholly owned subsidiaries: Sangui BioTech, Inc., SanguiBioTech AG,
GlukoMediTech AG, and Sangui Biotech Singapore Pte
Ltd.




Sangui
BioTech, Inc.




Sangui,
BioTech, Inc. (SBT) was principally engaged in the development and manufacturing
of immunodiagnostic kits, which were sold by SBT in niche markets in the United
States and Europe.  During the first quarter of the 2003 fiscal year,
SBT sold its assets, and commenced a wind-down of its U.S. business
operations.  SBT was merged with and into SGBI effective December 31,
2002.




Sangui
Biotech Singapore Pte
Ltd.




Sangui
Biotech Singapore Pte Ltd. (Sangui Singapore) was incorporated as a wholly owned
subsidiary of SGBI in Singapore on May 15, 1999.  Sangui Singapore was
the Asian regional office for SGBI and was engaged in animal experiments in
conjunction with the German subsidiaries.  Effective as of January 31,
2003, Sangui Singapore was wound down and closed.  On February 25,
2004, the Registry of Companies and Businesses of the Republic of Singapore
informed the company, that it would announce the projected strike-off from its
register in its official Gazette on March 31, 2004 and that three months
following the name of Sangui Singapore would be struck off the register without
further notice.  The company assumes, therefore, that the strike-off
was executed on or about June 30, 2004.




GlukoMediTech
AG




GlukoMediTech
AG (Gluko AG) was established and organized under the laws of Germany in Mainz,
Germany on July 15, 1996.  Gluko AG was developing long-term
implantable glucose sensors, by-products thereof, and diverse other
sensors.  Since additional financing for the next planned step of
product development could not be secured, Gluko AG was merged with Sangui AG
effective June 30, 2002.  While further development work in this area
was halted, Sangui GmbH is working to secure a limited number of key
patents relating to the existing Glucose Sensors.




SanguiBioTech
AG/SanguiBioTech GmbH




SanguiBioTech
AG (Sangui GmbH) was established and organized under the laws of Germany in
Mainz, Germany on November 25, 1995.  Effective November 4, 2003,
SanguiBioTech AG was converted into SanguiBioTech GmbH, a limited liability
company under German law.  SanguiBioTech GmbH develops
hemoglobin-based artificial oxygen carriers for use as blood additives, blood
volume substitutes and variant products thereof.  SanguiBioTech GmbH
has also developed an anti-aging cosmetic and a number of related products aimed
at improving oxygen supply to the skin.  Enhanced oxygen supply is the
key to improved wound healing, therefore the company has extended its product
portfolio to contain wound pads and other wound management products with these
goals in mind.  The facilities of SanguiBioTech GmbH are located on
the premises of the Forschungs- und Entwicklungszentrum of the University of
Witten/Herdecke, Witten, Germany.




To
date, neither SGBI nor any of its subsidiaries has had profitable
operations.  The Company has never been profitable, and through June
30, 2008, SGBI's accumulated deficit has exceeded $23million.  The
Company expects to continue to incur substantial losses over the next several
years as it pursues its research and development efforts, testing activities and
other growth operations.  SGBI's most promising potential products are
still in early development stages.  As such the Company will need to
obtain substantial additional capital to fulfill its business
plan.




The
Company has adopted a program aimed at cost reductions and at refocusing SGBI’s
funds to accelerate time to market for its most promising and mature
products.  Effective as of August 31, 2004, the company reduced any
extraneous activities for cost saving purposes.  The Company’s current
key focus is on selling its cosmetics and wound management products to
distribution partners, identifying additional industrial and distribution
partners for its patents and products, and on obtaining the additional financial
resources necessary to finalize the certification processes of its development
products.  No assurance can be given that SGBI’s program will be
successful.


1


BUSINESS
OF THE COMPANY




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




The
focus of SanguiBioTech GmbH has been the development of oxygen carriers capable
of providing oxygen transport in humans in the event of acute and/or chronic
lack of oxygen due to arterial occlusion, anaemia or blood loss whether due to
surgery, trauma, or other causes.  SanguiBioTech 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.  SanguiBioTech GmbH , has in addition
developed external applications of oxygen transporters in the medical and
cosmetic fields in the form of sprays
for the healing of chronic wounds andof gels and emulsions for the
regeneration of the skin.




SanguiBioTech
GmbH holds the exclusive distribution rights for Chitoskin wound pads for the
European Union and various other countries.  SanguiBioTech GmbH has
filed a patent cooperation treatment application (PCT) for the production and
use of improved Chitoskin wound pads using gelatine instead of collagen as the
carrier substance.




ARTIFICIAL
OXYGEN CARRIERS




SanguiBioTech
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, SanguiBioTech GmbH decided that porcine hemoglobin should be used
as the basic material for its artificial oxygen carriers.  In March
1999, SanguiBioTech GmbH decided which hemoglobin hyperpolymer would go into
preclinical investigation, that glutaraldehyde would be utilized as a cross
linker, and further that the polymer hemoglobin be chemically masked to prevent
protein interaction in blood plasma.  The fine adjustment of the
molecular formula of the artificial oxygen carriers - optimized for laboratory
scale production - was finalized in the summer of
2000.




The
experiments completed in SanguiBioTech 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,
SanguiBioTech 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.  In October
2006, a contract was entered into between SanguiBioTech 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 Mexican National Health
Organizations, ERC will initiate the necessary steps to begin the pre-clinical
test phase for the products in due course.




According
to regulatory requirements, all drugs must complete preclinical and clinical
trials before approval (e.g. Government
Regulation; No Assurance of Product 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, by way of the blood, 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.




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




In
the course of its 2008 fiscal year, Sangui developed a comprehensive cosmetics
series comprising five separate formulations including a novel skin purifier and
a face care formulation using hyaluronic acid as an additional moisturizing
agent. Marketing and distribution of the new series started subsequent to the
period covered by this report in September, 2008.




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 in September 2006.




2





CHITOSKIN
WOUND PADS




Usually,
normal ("primary") wounds tend to heal over a couple of days without leaving
scars following a certain sequence of phases. Burns and certain diseases impede
the normal wound healing process, resulting in large, hardly healing
("secondary") wounds which only close by growing new tissue from the bottom.
Wound dressings serve to safeguard the wound with its highly sensitive new
granulation tissue from mechanical damage as well as from infection. Using the
natural polymer chitosan, Sangui’s Chitoskin wound dressings show outstanding
properties in supporting wound healing.




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 and such
other countries as accept the CE mark as a valid product
authorization.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.




In
the course of its 2008 fiscal year Sangui started to develop a new and improved
wound pad formulation for surgical applications. Different variations of the
formulation are currently being tested in the USA and in
Europe.


Sangui’s
business model in this field is reliant upon cooperation with its manufacturing
and distribution partners.  Sangui has its wound pads produced by a
certified contract manufacturer and sells the products to specialized industry
partners.  For the European markets, Karl Beese GmbH, a leading German
vendor and distributor of hospital supplies, acts as the lead
distributor.
  HEMOSPRAY
WOUND SPRAY
  SanguiBioTech
GmbH has developed a novel medical product aimed at the healing of chronic
wounds. Chronic wounds are a medical problem of increasing importance as they
originate from widespread risk factors such as diabetes, obesity, smoking etc.
Lack of oxygen supply to the cells in the wound ground is the main reason why
those wounds lose their genuine healing power. Based on its concept of
artificial oxygen carriers, Sangui’s HEMOSPRAY wound spray product bridges the
watery wound surface and permits an enhanced afflux of oxygen to the wound
ground.
  In
2007, subsequent to a series of successful individual therapies in Germany, and
under a cooperation agreement with SanguiBioTech GmbH signed October 2006, ERC
Nano-Med of Monterrey, Mexico, established its wholly-owned subsidiary Sangui
Latino-America (SLA). SLA opened two wound ambulances and carried out a large
number of successful wound treatments using Sangui products in preparation of
the planned registration of Hemospray for the Latin American
markets.
  Product
registration procedures have been initiated in Mexico and Europe. In the course
of its 2008 fiscal year SanguiBioTech GmbH submitted the required independent
expert opinions about the toxicological and virological status of Hemospray to
the Notified Body, an important milestone in the registration according to the
CE standards of the European Union.
  After
a successful registration of Hemospray, Sangui’s business model in this field
will be reliant upon cooperation with its manufacturing and distribution
partners.  Sangui has its wound spray produced by a certified contract
manufacturer and intends to sell the product to specialized industry
partners.


PATENTS
AND PROPRIETARY RIGHTS




The
Company seeks patent protection for all of its research and development, and all
modifications and improvements thereto.  As of June 30, 2008
Sangui GmbH had been granted 13 patents.  Furthermore, it has applied
for several additional patents, most of which have been filed in Germany (DE),
the United States of America (US), and as an international patent application
with the European Patent Office (EP).  Validation
of EP patents includes Germany, France, Great Britain, Italy and
Spain.  Below are listed the most pertinent of the rights
held by the Company.




1.
Haemoglobin-Hyperpolymers




EP
      0 685 492
              “Process
      for the preparation of haemoglobin hyperpolymers of uniform molecular
      weight” (patent granted)US
      5,985,332
              “Hemoglobins
      provided with ligands protecting the oxygen binding sites for use as
      artificial oxygen carriers for direct application in
      medicineEP
      0857 733
              and
      biolgy, and method for the preparation thereof” (patents
      granted)US
      6,956,052
              “Mammalion
      haemoglobin compatible with blood plasma, cross-linked and conjugated with
      polyalkylene oxides as artificial medical oxygenEP
      1 299 457
              carriers, production
      and use thereof”  (US
      patent granted, EP patent pending)EP
      1 249
      385
              “Method
      for the production of artificial oxygen carriers from covalently cross
      linking haemoglobin with improved functional propertiesof
      haemoglobin by cross-linking in the presence of chemically non-reacting
      effectors of the oxygen affinity of the haemoglobin” (patent
      granted)US 7,005,414
              “Synthetic
      oxygen transport made from cross-linked modified human or porcine
      haemoglobin with improved properties, methodEP
      1 294 386
              for
      a preparation thereof from purified material and use thereof” (patents
      granted)US
      2007/0049517
              “Use
      of hypo-oncotic solutions of hyperpolymerised haemoglobins to be added to
      the human blood circulation in treatmentEP
      1 682 167
              of
      lung oedema” (patents
pending)




3





2.
GlucoTector




US
      4,775,514
                        “Luminescent
      layers for use in apparatus for determining the oxygen concentration in
      gases and the like” (patent granted)DE
      198 26 294
                        “Polarimetric
      procedure for determining the (main) vibration plane of polarized light to
      about 0.1 m° and miniaturized device for its implementation” (patent
      granted)DE199
      11
      265
                        “Method
      for the measurement of the concentration of glucose in aequous solutions
      containing proteins, i.e. in interstitial tissue fluids in particular, as
      well as implantable devices for carrying out said method” (patent
      granted)EP
      01 940
      355
                        “Method
      for the long-term stable and well-reproducible spectrometric measurement
      of the concentrations of components ofDE
      100 20 615
                        aqueous solutions,
      and device for carrying out said method” (German
      patent granted, EP patent pending)DE
      100 20 613
                        “Method
      and Device for reproducible polarimetric measurement of the concentration
      of the components of aequous solutions”(patent
      granted)EP
      1 295
      107
                        “Device
      for combined and simultaneous use of several measuring methods for
      analysing components of a liquid mixtureUS
      10/312,142
                        of
      several substances” (German Patent Granted; EP and US Patents
      Pending)




3.
Cosmetics




EP 1
      513 492
                  “Microemulsions
      having a binary phase differentiability and active substance
      differentiability, the production thereof and their
use,US
      2005/0129747
                  particularly for the
      topical supply of oxygen” (EP
      patent granted, US patent
  pending)




4.
Wound Management




EP 1
      485 120
              “Use
      of one or more natural or modified oxygen carriers, devoid of plasma and
      cellular membrane constituents,US
      10/508,092
              for externally
      treating open, in particular chronic wounds” (EP
      patent granted, US patent pending)EP
      1 696 971

                    US
      2007/0148215
              “Therapeutically
      active wound dressings, production thereof, and use of the same” (patents
      pending)
   4
 MANUFACTURING,
MARKETING AND DISTRIBUTION




For
the manufacturing of our products we rely on certified specialist contract
manufacturers who specialize in the fields of cosmetic and medical
products.  Production processes have been certified and comply with
the respective best practices in the industry.  Production is
constantly being monitored by us and by the respective certifying
authorities.




We
still have limited experience in the selling and marketing of our
products.  We are therefore dependent on attracting industry marketing
and distribution partners in order to succeed in selling our products in their
respective markets.




RESEARCH
AND DEVELOPMENT




Research
and development are charged to operations as they are incurred.  Legal
fees and other direct costs incurred in obtaining and protecting patents are
expensed as incurred. Research and development costs totaled $213,614 and $155,886 during the fiscal years ended
June 30, 2008 and 2007, respectively.




GOVERNMENT
REGULATION




SGBI
and its former United States subsidiary were subject to governmental regulation
under the Occupational Safety and Health Act, the Environmental Protection Act,
the Toxic Substances Control Act, and other similar laws of general application,
as to all of which SGBI believes it and its subsidiaries are in material
compliance.




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




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




COMPETITION




The
market for the products and technologies of SGBI is highly competitive, and SGBI
expects competition to increase.  Experiments and clinical testing in
the field of artificial oxygen carriers are being carried out by Alliance
Pharmaceutical Corp. of San Diego, California, as well as Biopure Corp. of
Cambridge, Massachusetts.  Companies researching into the possibility
of developing implantable glucose sensors include Roche Diagnostics, Animas,
Corp., Frazer, Pennsylvania, and Medtronic Inc. of Sylmar,
California.  In the fields of anti-aging and anti-cellulite cosmetics,
all major cosmetic vendors are actively marketing proprietary
formulations.  Leading wound pad providers include Johnson &
Johnson, Bristol-Myers Squibb, as well as Beiersdorf
AG.




DEPENDENCE
ON MAJOR CUSTOMERS




As
of June 30, 2008, the company entertained business relationships with one major
customer, Karl Beese GmbH & Co.  No assurance can be given that
this company will be successful in marketing and distributing our
products.  It constitutes less than 30% of the Company’s gross
revenues for the year ended June 30,
2008.


HUMAN
RESOURCES
  The
Company considers its relations with its employees to be
favorable.  As of June 30, 2008 SGBI and its subsidiaries had one
fulltime employee, who was not involved in research and
development.  For research and development purposes, the Company had
consulting arrangements with six
individuals.





DIVIDENDS




The
Company anticipates that it will use any funds available to finance its growth
and that it will not pay cash dividends to stockholders in the foreseeable
future.




REPORTS
TO SECURITY HOLDERS




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






5





CERTAIN
BUSINESS RISKS




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




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




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




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




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




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




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




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





Conflicts
of Interest; Related Party Transactions




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




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




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




Substantial
Doubt that the Company Can Continue as a Going
Concern




The
Company expects to continue to incur significant capital expenses in pursuing
its business plan to market its products and expand its product line, while
obtaining additional financing through stock offerings or other feasible
financing alternatives.  In order for the Company to continue 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.


6


Future
Capital Needs and Uncertainty of Additional
Funding




Although
management believes that SGBI's cash position should be sufficient to cover its
financing for at least the current fiscal year, substantial funds will be
required to effect SGBI's development plans.  The Company will require
additional cash for: (i) payment of increased operating expenses; (ii) payment
of development expenses; and (iii) further implementation of its business
strategies.  Such additional capital may be raised by additional
public or private financing, as well as borrowings and other
resources.  To the extent that additional capital is received by SGBI
by the sale of equity or equity-related securities, the issuance of such
securities will result in dilution to SGBI's shareholders.  There can
be no assurance that additional funding will be available on favorable terms, if
at all.  SGBI may also seek arrangements with collaborative partners
in order to gain additional funding, marketing assistance or other
contributions.  However, such arrangements may require SGBI to
relinquish rights or reduce its interests in certain of its technologies or
product candidates.  The inability of SGBI to access the capital
markets or obtain acceptable financing could have a material adverse effect on
the results of operations and financial condition of SGBI.  Moreover,
if funds are not available from any sources, SGBI may not be able to continue to
operate.   As of June 30, 2007, the Company has issued all of its
common shares of stock as authorized by its Articles.  The
Company is unable to consummate any additional sales of common stock until
additional shares are authorized by the Board of Directors, the
shareholders of the Company, and an amendment to the Company’s
Articles of Incorporation is completed.




Dependence
on Key Personnel




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




SGBI
and its subsidiaries are dependent on the efforts and abilities of their senior
management.  The loss of various members from management could have a
material adverse effect on the business and prospects of SGBI.  In
particular, SGBI will depend on the service of Professor Wolfgang Barnikol
because he is instrumental in his expertise in the development of the oxygen
carrier and glucose sensor products.  There can be no assurance that
upon the departure of key personnel from the service of SGBI or its subsidiaries
suitable replacements will be available.




Licenses
and Consents




The
utilization or other exploitation of the products and services developed by SGBI
or its subsidiaries may require SGBI or its subsidiaries to obtain licenses or
consents from the producers or other holders of patents, trademarks, copyrights
or other similar rights (Intellectual Property) relating to the products and
technologies of SGBI or its subsidiaries.  In the event SGBI or its
subsidiaries are unable, if so required, to obtain any necessary license or
consent on terms which the management of SGBI or its subsidiaries consider to be
reasonable, SGBI or its subsidiaries may be required to cease developing,
utilizing, or exploiting products or technologies affected by those Intellectual
Property rights.  In the event SGBI or its subsidiaries are challenged
by the holders of such Intellectual Property rights, there can be no assurance
that SGBI or its subsidiaries will have the financial or other resources to
defend any resulting legal action, which could be
significant.




Technological
Factors




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




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




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




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




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




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


7


Market
Acceptance




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





Government
Regulation; No Assurance of Product
Approval




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




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




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




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




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




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




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


8
 Additionally,
SGBI will be subject to regulatory authorities in Germany and other countries
governing clinical trials and product sales.  Even if FDA approval is
obtained, approval of a product by the comparable regulatory authorities of
other countries must be obtained prior to the commencement of marketing the
product in those countries.  The approval process varies from country
to country and the time required may be longer or shorter than that required for
FDA approval.  The foreign regulatory approval process includes all of
the risks associated with obtaining FDA approval set forth above, and approval
by the FDA does not ensure approval by the health authorities of any other
country.  There can be no assurance that any foreign regulatory agency
will approve any product submitted for review by
SGBI.




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





Intense
Competition




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





Uncertainties
Associated With Patents and Proprietary
Rights




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




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




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




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




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




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




Risk
of Product Liability; Potential Unavailability of
Insurance




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




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


9


Uncertainties
Relating to Pricing and Third-Party
Reimbursement




The
operating results of SGBI may depend in part on the availability of adequate
reimbursement for the products of SGBI from third-party payers, such as
government entities, private health insurers and managed care
organizations.  Third-party payers are increasingly seeking to
negotiate the pricing of medical services and products.  In some
cases, third-party payers will pay or reimburse a user or supplier of a product
for only a portion of the purchase price of the product.  In the case
of the products of SGBI, payment or reimbursement by third-party payers of only
a portion of the cost of such products could make such products less attractive,
from a cost perspective, to users, suppliers and physicians.  There
can be no assurance that reimbursement, if available, will be
adequate.  Moreover, certain of the products of SGBI may not be of the
type generally eligible for third-party reimbursement.  If adequate
reimbursement levels are not provided by government entities or other
third-party payers for the products of SGBI, the business, financial condition
and results of operations of SGBI would be materially adversely
affected.  A number of legislative and regulatory proposals aimed at
changing the United State's health care system have been proposed in recent
years.  While SGBI cannot predict whether any such proposals will be
adopted, or the effect that any such proposal may have on its business, such
proposals, if enacted, could have a material adverse effect on the business,
financial condition or results of operations of SGBI.





Risk
of Product Recall; Product Returns




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




Risks
of International Sales and Operations




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




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




Lack
of Commercial Manufacturing and Marketing
Experience




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




The
manufacture of the products of SGBI involves a number of steps and requires
compliance with stringent quality control specifications imposed by SGBI and by
the FDA or similar regulatory bodies under the law of the respective
countries.  Moreover, SGBI's products can only be manufactured in a
facility that has undergone a satisfactory inspection by the FDA.  For
these reasons, SGBI would not be able to quickly replace its manufacturing
capacity if one of its manufacturing contractors or partners were unable to use
their manufacturing facilities as a result of a fire, natural disaster,
equipment failure or other difficulty, or if such facilities are deemed not in
compliance with the FDA's Good Manufacturing Practice (GMP) requirements and the
non-compliance could not be rapidly rectified.  The inability or
reduced capacity of SGBI to manufacture their products would have a material
adverse effect on SGBI's business and results of
operations.




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




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




Hazardous
Materials And Environmental Matters




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


10


Fluctuations
in Foreign Currency Exchange Rates could have an Adverse
Impact




Because
a portion of our total revenue is derived from international operations that are
conducted in foreign currencies, changes in value of these foreign currencies
relative to the US dollar may affect our results of operation and financial
position.  If for any reason exchange or price controls or other
restriction on the conversion of foreign currencies were imposed, our business
could be adversely affected.




ITEM 2.PROPERTIES




The
Company leases its office and laboratory facilities and is housed in
approximately 8,600 square feet based in the Forschungs-und Entwicklungszentrum
of the University Witten/Herdecke, Germany.  Rent expense was
approximately $90,500 and $78,000 during the years ended June 30, 2008 and 2007,
respectively.




ITEM
3.LEGAL
PROCEEDINGS




On
February 14, 2007, Dr. Rainer Felfe, filed a claim (4 Ca 431/07) against the
Company and its subsidiary, SanguiBioTech GmbH, with the Industrial Relations
Court in Bochum, Germany (Arbeitsgericht Bochum). Dr. Felfe's claim states that
he is entitled to receive outstanding wages and salaries owed to Prof. Dr. Dr.
Wolfgang Barnikol by the Company, or its subsidiary, in the amount of
approximately 370,000 euros (approximately US $503,200) as partial relief of a
judgment rendered in a civil case against Dr. Barnikol (Oberlandesgericht
Düsseldorf I 6 U 96/06). Dr. Barnikol has never made a claim against the
Company, or its subsidiary, for outstanding wages with any governmental agency
and acknowledges there are no outstanding wages are due to him by either the
Company or its subsidiary. The claim by Dr. Felfe has been declared pending by
the Industrial Relations Court until a final judgment is rendered by the Federal
Supreme Court in the appeal to the above civil case. The Company believes the
claim lacks merit and plans to vigorously defend this
claim.




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




ITEM 4.SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS




No
matter was submitted to our security holders for approval during the period
covered by this Report.





PART
II




ITEM 5.MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES




Market
Information




As
of June 30, 2008, SGBI's common stock was traded on www.pinksheets.com
under the symbol SGBI as well as on the OTC market of the Hamburg stock exchange
in Germany.




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




CLOSING PRICES 
      (US$)FISCAL
      YEAR
            PERIOD
            
            HIGH
            
            
            LOW2008
            July
      - September
            
            
            0.55
            
            
            
            0.30October
      - December
            
            
            0.32
            
            
            
            0.21January
      - March
            
            
            0.30
            
            
            
            0.16April
      – June
            
            
            0.40
            
            
            
            0.172007
            July
      - September
            
            
            0.16
            
            
            
            0.11October
      - December
            
            
            0.30
            
            
            
            0.12January
      - March
            
            
            0.27
            
            
            
            0.175April
      – June
            
            
            1.01
            
            
            
            0.20




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




Holders





At
June 30, 2008, the number of record holders of the Company's common stock was
approximately 875.




Dividends




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




Recent
Sales Of Unregistered Securities


In
January, 2006, the company sold 1,496,251 shares of common stock to one Swiss
investor yielding a cash contribution in the amount of $135,758. The issuance
was not involving a public offering the offer and sale of the shares occurred
outside of the United States and the shares were sold and issued to individuals
who reside outside of the United States, pursuant to an exemption from
registration under Rule 901, Regulation S of the Securities Act of 1933, as
amended.


11


ITEM  6.     MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATIONS
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
  The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue,
expenses, and related disclosure of contingent assets and
liabilities.  We believe the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements.  Actual results may differ from
these estimates under different assumptions or
conditions.
  CRITICAL
ACCOUNTING POLICIES  Our significant accounting policies are described in
Note 1 to the consolidated financial statements for the year ended June 30,
2008.  The following are our critical accounting
policies:
  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 are charged to operations as they are incurred.  Legal
fees and other direct costs incurred in obtaining and protecting patents are
expensed as incurred. Research and development costs totaled $213,614 and
$155,886 during the fiscal years ended June 30, 2008 and 2007,
respectively.
  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.
  New
Accounting Pronouncements
  In
December 2004, the FASB issued SFAS No. 123R "Shared 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 shared 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.
  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. The Company is currently evaluating the impact of applying
the various provisions of SFAS 157.
 12
 FINANCIAL
POSITION
  The
Company’s current assets increased by $852,604, or 1,200%, from June 30, 2007
to $923,533 at June 30, 2008.  The increase is primarily
attributable to a significant increase in cash and shareholder loans
receivable.
  The
Company's net property and equipment decreased $2,491 or 35%, from June 30, 2007
to $7,021 at June 30, 2008.  The decrease is primarily attributable to
the current year depreciation of approximately $3,961, partially offset by
$6,452 in purchases of new property and equipment during the
year.
  The
Company funded its operations primarily through borrowings on promissory notes
payable.  The Company’s stockholders’ equity decreased $694,587, to a
deficit of $1,078,291.  The primary decrease is caused by the
Company's current year net loss of $854,161.
  REVENUES.  Revenues
decreased 44% to $207,176 during the year ended June 30, 2008 from $372,015
during 2007.  This decrease is due primarily to the company’s
decreased return on marketing efforts with respect to cosmetics
products.  The Company incurred Cost of Sales totaling $45,724 during
the 2008 fiscal year, an 82% decrease from the prior year
total.
  RESEARCH
AND DEVELOPMENT.  Research and development expenses increased 37% to
$213,614 in 2008 from $155,886 in 2007.  This increase of $57,728 was
primarily the result of the Company attempting to improve and expand the product
within the cosmetics line.
  GENERAL
AND ADMINISTRATIVE.  General and administrative expenses decreased
less than one percent to $663,947 in 2008 from $665,884 in 2007.  This
very slight decrease is indicative of the fact that the Company is attempting to
grow and expand its product line and sales efforts without increasing costs and
overhead to unreasonable levels.  Legal and accounting expenses have
remained fairly constant when compared to the 2007 fiscal
year.
  NET
LOSS.  As a result of the above factors, the Company's consolidated
net loss was approximately $854,000, or $0.02 per common share in 2008, compared
to $721,562, or $0.02 per common share, in 2007.
  LIQUIDITY
AND CAPITAL RESOURCES
  For
the year ended June 30, 2008, net cash used in operating activities increased to
$1,140,922 from $755,925 for the year ended June 30, 2007, primarily related to
significant changes in prepaid expenses, and in current liabilities during the
2008 fiscal year.
  For
the year ended June 30, 2008, net cash flows from investing activities decreased
to an outflow of $6,452, from an outflow of $20,328 for the year ended June 30,
2007.  The principal reason for the decrease was the purchase of
equipment items during the 2008 fiscal year.
  The
Company had a working capital deficit of $1,346,686 at June 30, 2008, compared
to working capital deficit of $515,437 at June 30, 2007, an overall decrease of
$831,249, due primarily to the Company’s net loss for the year and the increase
in promissory notes payable.
  The
Company incurred a net loss applicable to common stockholders of $854,161 and
used cash in operating activities of $1,140,922 for the year ended June 30,
2008.  These and other conditions raise substantial doubt about the
Company's ability to continue as a going concern.  The Company expects
to continue to incur significant capital expenses in pursuing its business plan
to market its products and expand its product line, while obtaining additional
financing through stock offerings or other feasible financing
alternatives.  In order for the Company to continue its operations at
its existing levels, the Company will require significant additional funds over
the next twelve months.  Therefore, the Company is dependent on funds
raised through equity or debt offerings.  Additional financing may not
be available on terms favorable to the Company, or at all.  If these
funds are not available the Company may not be able to execute its business plan
or take advantage of business opportunities.  The ability of the
Company to obtain such additional financing and to achieve its operating goals
is uncertain.  In the event that the Company does not obtain
additional capital or is not able to increase cash flow through the increase of
sales, there is a substantial doubt of its being able to continue as a going
concern.  The accompanying condensed consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
  Sales
of our anti-aging formulation started in early 2005, sales of our product skin
regeneration as well as wound pad products started in the course of the first
quarter of 2007. The current state of the different sales efforts has induced
management to believe that revenues from these products may be obtainable in the
course of the current fiscal year.  However, the Company will need
substantial additional funding to fulfill its business plan and the Company
intends to explore financing sources for its future development
activities.  No assurance can be given that these efforts will be
successful.
 13


ITEM
7.FINANCIAL
STATEMENTS




















SANGUI
BIOTECH INTERNATIONAL, INC.
  CONSOLIDATED
FINANCIAL STATEMENTS
  June 30,
2008





14





MOORE & ASSOCIATES, CHARTERED


ACCOUNTANTS
AND ADVISORS
 PCAOB
REGISTERED


REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM








To
the Board of Directors


Sangui
Biotech International, Inc.





We have
audited the accompanying consolidated balance sheet of Sangui Biotech
International, Inc. as of June 30, 2008, and the related consolidated statements
of operations, stockholders’ equity (deficit) and cash flows for the years ended
June 30, 2008 and June 30, 2007. These financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these financial statements based on our
audits.
 
 We
conduct our audits in accordance with standards of the Public Company Accounting
Oversight Board (United States).  Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Sangui Biotech
International, Inc. as of June 30, 2008, and the related consolidated statements
of operations, stockholders’ equity (deficit) and cash flows for the years ended
June 30, 2008 and June 30, 2007, in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1 to the
financial statements, the Company has incurred a net loss applicable to common
stockholders of $854,161 and used cash in operating activities of $1,140,922,
which raises substantial doubt about its ability to continue as a going
concern.  Management’s plans concerning these matters are also
described in Note 1.  The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.





/s/
Moore & Associates, Chartered





Moore
& Associates Chartered


Las
Vegas, Nevada


October
15, 2008





2675 S. Jones Blvd. Suite
109, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501







15
 
 SANGUI BIOTECH INTERNATIONAL, INC.Consolidated
      Balance SheetASSETSJune
      30,2008CURRENT
      ASSETSCash
                              
                              $
                              229,717Accounts
      receivable
                              
                              
                              5,021Inventory
                              
                              
                              127,109Shareholder
      loans receivable
                              
                              
                              533,059Prepaid
      expenses and other assets
                              
                              
                              28,627Total
      Current Assets
                              
                              
                              923,533FIXED
      ASSETS, Net
                              
                              
                              7,021OTHER
      ASSETSTax
      refunds receivable
                              
                              
                              40,166Other
      non-current assets
                              
                              
                              221,208Total
      Other Assets
                              
                              
                              261,374TOTAL
      ASSETS
                              
                              $
                              1,191,928


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


16


SANGUI
      BIOTECH INTERNATIONAL, INC.Consolidated
      Balance Sheets (Continued)LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)June
      30,2008CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                        
                        $
                        317,378Notes
      payable
                        
                        
                        1,952,841Total
      Current Liabilities
                        
                        
                        2,270,219TOTAL
      LIABILITIES
                        
                        
                        2,270,219STOCKHOLDERS'
      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,
      50,000,000 shares issued and outstanding
                        
                        
                        18,969,358Additional
      paid-in capital
                        
                        
                        3,138,674Treasury
      stock
                        
                        
                        -Accumulated
      other comprehensive income
                        
                        
                        154,272Accumulated
      deficit
                        
                        
                        (23,340,595
                        )Total
      Stockholders' Equity (Deficit)
                        
                        
                        (1,078,291
                        )TOTAL
      LIABILITIES AND STOCKHOLDERS'EQUITY
      (DEFICIT)
                        
                        $
                        1,191,928
 The
accompanying notes are an integral part of these consolidated financial
statements.
  17





SANGUI BIOTECH INTERNATIONAL, INC.Consolidated
      Statements of OperationsFor
      the Years EndedJune
      30,2008
                    
                    
                    2007REVENUES
                    
                    $
                    207,176
                    
                    
                    $
                    372,015COST
      OF SALES
                    
                    
                    45,724
                    
                    
                    
                    256,805GROSS
      PROFIT
                    
                    
                    161,452
                    
                    
                    
                    115,210OPERATING
      EXPENSESResearch
      and development
                    
                    
                    213,614
                    
                    
                    
                    155,886Depreciation
      and amortization
                    
                    
                    3,961
                    
                    
                    
                    21,540General
      and administrative
                    
                    
                    663,947
                    
                    
                    
                    665,884Total
      Operating Expenses
                    
                    
                    881,522
                    
                    
                    
                    843,310OPERATING
      LOSS
                    
                    
                    (720,070
                    )
                    
                    
                    (728,100
                    )OTHER
      INCOME (EXPENSE)Interest
      income
                    
                    
                    3,500
                    
                    
                    
                    90Interest
      expense
                    
                    
                    (137,591
                    )
                    
                    
                    (23,676
                    )Other
      income (loss)
                    
                    
                    -
                    
                    
                    
                    30,124Total
      Other Income (Expense)
                    
                    
                    (134,091
                    )
                    
                    
                    6,538NET
      LOSS
                    
                    
                    (854,161
                    )
                    
                    
                    (721,562
                    )OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation adjustments
                    
                    
                    993,610
                    
                    
                    
                    1,147,882Unrealized
      gain on marketable securities
                    
                    
                    -
                    
                    
                    
                    -Total
      Other Comprehensive Income (Loss)
                    
                    
                    993,610
                    
                    
                    
                    1,147,882COMPREHENSIVE
      INCOME (LOSS)
                    
                    $
                    139,449
                    
                    
                    $
                    426,320BASIC
      AND DILUTEDLOSS
      PER SHARE
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.01
                    )WEIGHTED
      AVERAGENUMBER
      OF SHARESOUTSTANDING
                    
                    
                    50,000,000
                    
                    
                    
                    50,000,000


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


18





SANGUI BIOTECH INTERNATIONAL, INC.Consolidated
      Statements of Stockholders' Equity (Deficit)AccumulatedAdditional
                    
                    
                    
                    
                    
                    OtherCommon
      Stock
                    
                    
                    Paid-In
                    
                    
                    Treasury
                    
                    
                    Comprehensive
                    
                    
                    AccumulatedShares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Stock
                    
                    
                    Income
                    
                    
                    DeficitBalance,
      June 30, 2006
                    
                    
                    50,000,000
                    
                    
                    $
                    18,969,358
                    
                    
                    $
                    1,958,376
                    
                    
                    $
                    -
                    
                    
                    $
                    453,434
                    
                    
                    $
                    (21,764,872
                    )Currency
      translation adjustment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    694,448
                    
                    
                    
                    -Net
      loss for the year endedJune
      30, 2007
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (721,562
                    )Balance,
      June 30, 2007
                    
                    
                    50,000,000
                    
                    
                    
                    18,969,358
                    
                    
                    
                    1,958,376
                    
                    
                    
                    -
                    
                    
                    
                    1,147,882
                    
                    
                    
                    (22,486,434
                    )Increase
      in capital reserve
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,180,298
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Currency
      translation adjustment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (993,610
                    )
                    
                    
                    -Net
      loss for the year endedJune
      30, 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (854,161
                    )Balance,
      June 30, 2008
                    
                    
                    50,000,000
                    
                    
                    $
                    18,969,358
                    
                    
                    $
                    3,138,674
                    
                    
                    $
                    -
                    
                    
                    $
                    154,272
                    
                    
                    $
                    (23,340,595
                    )


The accompanying notes
arean
integral part of these consolidated financial
statements.




19





SANGUI BIOTECH INTERNATIONAL, INC.Statements
      of Cash FlowsFor
      the Years EndedJune
      30,2008
                    
                    
                    2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                    
                    $
                    (854,161
                    )
                    
                    $
                    (721,562
                    )Adjustments
      to reconcile net loss to net cashused
      by operating activities:Depreciation,
      depletion and amortization
                    
                    
                    3,961
                    
                    
                    
                    21,288Changes
      in operating assets and liabilitiesIncrease
      in accounts receivable
                    
                    
                    31,366
                    
                    
                    
                    (19,786
                    )Increase
      in inventory
                    
                    
                    (38,756
                    )
                    
                    
                    (73,633
                    )Increase
      in prepaid expenses and other assets
                    
                    
                    (173,022
                    )
                    
                    
                    (54,432
                    )Increase
      in accounts payable and accrued expenses
                    
                    
                    (110,310
                    )
                    
                    
                    92,200Net
      Cash Used by Operating Activities
                    
                    
                    (1,140,922
                    )
                    
                    
                    (755,925
                    )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of patents and licenses
                    
                    
                    -
                    
                    
                    
                    (6,218
                    )Purchases
      of fixed assets
                    
                    
                    (6,452
                    )
                    
                    
                    (14,110
                    )Net
      Cash Used by Investing Activities
                    
                    
                    (6,452
                    )
                    
                    
                    (20,328
                    )CASH
      FLOWS FROM FINANCING ACTIVITIESChange
      in notes payable
                    
                    
                    (134,742
                    )
                    
                    
                    (58,988
                    )Change
      in notes payable - related
                    
                    
                    1,699,208
                    
                    
                    
                    134,742Increase
      in capital reserve
                    
                    
                    1,180,298
                    
                    
                    
                    -Increase
      in notes receivable - related
                    
                    
                    (533,059
                    )
                    
                    
                    -Net
      Cash Provided by Financing Activities
                    
                    
                    2,211,705
                    
                    
                    
                    75,754EFFECTS
      OF EXCHANGE RATES
                    
                    
                    (853,111
                    )
                    
                    
                    694,448NET
      DECREASE IN CASH
                    
                    
                    211,220
                    
                    
                    
                    (6,051
                    )CASH
      AT BEGINNING OF PERIOD
                    
                    
                    18,497
                    
                    
                    
                    24,548CASH
      AT END OF PERIOD
                    
                    $
                    229,717
                    
                    
                    $
                    18,497SUPPLIMENTAL
      DISCLOSURES OFCASH
      FLOW INFORMATIONCASH
      PAID FOR:Interest
                    
                    $
                    -
                    
                    
                    $
                    -Income
      Taxes
                    
                    $
                    -
                    
                    
                    $
                    -


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




20 SANGUI BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008


NOTE 1 -
ORGANIZATION AND 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
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 haemoglobin, blood
substitutes and blood additives) and in the development of glucose implant
sensors.
  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 (see Note 7). 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.
 Going
Concern
 The
Company incurred a net loss applicable to common stockholders of $854,161 and
used cash in operating activities of $1,140,922 for the year ended June 30,
2008.  These and other conditions raise substantial doubt about the
Company's ability to continue as a going concern. The Company expects to
continue to incur significant capital expenses in pursuing its business plan to
market its products and expand its product line, while obtaining additional
financing through stock offerings or other feasible financing alternatives. In
order for the Company to continue its operations at its existing levels, the
Company will require significant additional funds over the next twelve months.
Therefore, the Company is dependent on funds raised through equity or debt
offerings.
  Additional
financing may not be available on terms favorable to the Company, or at all. If
these funds are not available the Company may not be able to execute its
business plan or take advantage of business opportunities. The ability of the
Company to obtain such additional financing and to achieve its operating goals
is uncertain. In the event that the Company does not obtain additional capital
or is not able to increase cash flow through the increase of sales, there is a
substantial doubt of its being able to continue as a going concern. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
  Consolidation
  The
consolidated financial statements include the accounts of Sangui BioTech
International, Inc. and its wholly owned domestic and foreign subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
  21
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Use of
Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the respective reporting period. Actual results could differ from those
estimates. Significant estimates made by management are, among others, the
realization of receivables and long-lived assets, and valuation allowance on
deferred tax assets.
  Risks and
Uncertainties
  The
Company's line of future pharmaceutical and cosmetic products (artificial oxygen
carriers or blood substitute and additives) as well as other medical products
being developed by Sangui 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.
  Financial
Instruments
  The
Company has financial instruments whereby the fair market value of the financial
instruments could be different than that recorded on a historical basis. The
Company's financial instruments consist of its cash and cash equivalents,
marketable securities, and accounts payable and accrued expenses.  The
carrying amount of the Company's cash and cash equivalents and accounts payable
and accrued expenses approximate their estimated fair values due to the
short-term nature of these financial statements. Marketable securities are
stated at fair value based upon quoted market prices and are classified as
available-for-sale securities.
  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.
  Cash and
Cash Equivalents
  The
Company maintains its cash in uninsured bank accounts in Germany. Cash and cash
equivalents include time deposits for which the Company has no requirements for
compensating balances. The Company has not experienced any losses in its
uninsured bank accounts.  The Company had no cash equivalents
outstanding as of June 30, 2008.
  22
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Property
and Equipment
  Property
and equipment are recorded at cost and are depreciated or amortized using the
straight-line method over the expected useful lives, which range from three to
five years. Leasehold improvements are amortized using the straight-line method
over the lesser of the estimated useful lives of the assets or the related lease
terms. Depreciation expense for the years ended June 30, 2008 and 2007 was
$3,961 and $21,540, respectively. Expenditures for normal maintenance and
routine repairs are charged to expense, and significant improvements are
capitalized. The cost and related accumulated depreciation of assets are removed
from the accounts upon retirement or other disposition; any resulting gain or
loss is reflected in the statement of operations.
  Patents
and Licenses
  Patents
and licenses are recorded at cost and are amortized using the straight-line
method over their estimated useful lives, which range from four to eight years.
Amortization expense for the years ended June 30, 2008 and 2007 was
$-0-.
  Impairment
of Long-Lived Assets
  Long-lived
assets and certain identifiable intangibles to be held and used by an entity are
reviewed by the management of the Company for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. As of June 30, 2008, management of the Company believes that no
impairment has been indicated. There can be no assurances, however, that market
conditions will not change or demand for the Company's products will continue
which could result in impairment on long-lived assets in the
future.
  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 are charged to operations as they are incurred.  Legal
fees and other direct costs incurred in obtaining and protecting patents are
expensed as incurred. Research and development costs totaled $213,614 and
$155,886 during the fiscal years ended June 30, 2008 and 2007,
respectively.
  Income
Taxes
  The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes."  Deferred tax assets and liabilities are recognized for future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
provided for certain deferred tax assets when it is more likely than not that
such tax assets will not be realized through future
operations.
  23
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  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 June 30, 2008 and 2007, the
Company had no potentially dilutive securities that would effect 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 cash equivalents and are recorded as components of stockholders'
equity.
  Segments
of an Enterprise and Related Information
  The
Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 establishes standards for the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to stockholders. It also requires entity-wide
disclosures about the products and services an entity provides, the material
countries in which it holds assets and reports revenues and its major customers,
if any. As of June 30, 2008, the Company has only one segment of enterprise
which is medical products manufacturing and sales.
  Inventory
  Inventory
is stated at the lower of cost (computed on a first-in, first-out basis) or
market value.  At June 30, 2008 all inventory consists of finished
goods.  Inventory is evaluated periodically by management for
potential impairment.  During the years ended June 30, 2008 and 2007,
the Company recognized no impairment expense pertaining to
inventory.
  Trade
Receivables
  The
Company periodically reviews its trade receivables for potential collectability
issues.  The Company has implemented the policy to charge-off trade
receivables older than 120 days outstanding as bad-debt expense.  As
of June 30, 2008, the Company had an allowance for doubtful accounts of
$-0-.
  24
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  New
Accounting Pronouncements
  During
the year ended June 30, 2008, the Company adopted the following accounting
pronouncements:
  In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial Guarantee Insurance Contracts-and interpretation of
FASB Statement No. 60”.  SFAS No. 163 clarifies how Statement 60
applies to financial guarantee insurance contracts, including the recognition
and measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company’s financial position, statements of operations, or cash flows at this
time.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally Accepted Accounting Principles”.  SFAS No.
162 sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB’s amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company’s financial position, statements of operations, or cash flows at
this time.
 
 In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities—an amendment of
FASB Statement No. 133.  This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of SFAS No. 161, but does not expect it to have a
material impact on its consolidated financial position, results of operations or
cash flows.
 
 In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based Payment.  In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for “plain vanilla” share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that this
will have an impact on the Company’s consolidated financial position, results of
operations or cash flows.
  25
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  New
Accounting Pronouncements (Continued)
  In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51.  This
statement amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). The Company
will adopt this Statement beginning March 1, 2009. It is not believed that this
will have an impact on the Company’s consolidated financial position, results of
operations or cash flows.
 
 In
December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations.’This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in
Statement 141.  This Statement establishes principles and
requirements for how the acquirer: (a) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; (b) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase;
and (c) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. This statement applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. The effective date of this statement is the same as
that of the related FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s consolidated financial position, results of operations
or cash flows.
 
 In
February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities—Including an Amendment of FASB Statement No.
115.  This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments in Debt and
Equity Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not report
net income. SFAS No. 159 is effective as of the beginning of an entities first
fiscal year that begins after November 15, 2007. Early adoption is permitted as
of the beginning of the previous fiscal year provided that the entity makes that
choice in the first 120 days of that fiscal year and also elects to apply the
provisions of SFAS No. 157 Fair Value Measurements.  The Company will
adopt SFAS No. 159 beginning March 1, 2008 and is currently evaluating the
potential impact the adoption of this pronouncement will have on its
consolidated financial statements.
  26
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  New
Accounting Pronouncements (Continued)
  In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements  This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company will adopt this statement March 1, 2008, and it is not believed that
this will have an impact on the Company’s consolidated financial position,
results of operations or cash flows.
  Major
Customers
  During
the years ended June 30, 2008 and 2007 the Company had three customers to whom
sales exceeded 10% of the Company’s total sales for the period.  Each
customer is an unrelated third party.  These three companies combined
to constitute approximately 70% of the Company’s gross revenues for the years
ended June 30, 2008 and 2007, respectively.
  NOTE  2  -  PROPERTY  AND  EQUIPMENT
  Property
and equipment consists of the following at June 30, 2008:
 Technical and
      laboratory
      equipment
                    
                    $
                    645,214Leasehold
      improvements
                    
                    
                    388,855Office
      equipment
                    
                    
                    170,722Office
      furniture
                    
                    
                    26,962Other
                    
                    
                    1,324Total
      property and equipment
                    
                    
                    1,233,077Less accumulated
      depreciation and amortization
                    
                    
                    (1,226,056
                    )Total
      property and equipment, net
                    
                    $
                    7,021
  NOTE  3  -  STOCKHOLDERS'  EQUITY
  Common
Stock - The Company is authorized to issue 50,000,000 shares of no par
value common stock. The holders of the Company's common stock are entitled to
one vote for each share held of record on all matters to be voted on by those
stockholders.
  Preferred
Stock - The Company is authorized to issue 5,000,000 shares of non-voting
no par value preferred stock. The Board of Directors has not designated any
liquidation value or dividend rates.
  Stock
Options - From time to time, the Company may issue stock options pursuant
to various agreements and other contemporary agreements.  At June 30,
2008 and 2007, and during the years ended June 30, 2008 and 2007, no options
were issued or outstanding.
  Treasury
Stock - On July 1, 2004, the Company purchased 100,000 shares of its
common stock from an investor for approximately $0.278 per share.  The
Company purchased an additional 620,000 shares of its common stock on November
11, 2004 for approximately $0.191 per share.  During the course of the
2005 fiscal year the Company sold a total of 288,000 of these treasury shares
for total proceeds of approximately $63,907, resulting in a loss of
approximately $13,602, which was applied to additional paid-in
capital.  During the 2006 fiscal year the remainder of these shares
were sold, resulting in a loss of approximately $28,022.  As of June
30, 2008 the Company held zero shares of treasury
stock.
  27
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE
4  -  INCOME  TAX  PROVISION
  No
current provision for income taxes for the years ended June 30, 2008 and 2007 is
required, since the Company incurred net operating losses through June 30,
2008.
  Income
tax expense for the years ended June 30, 2008 and 2007 differed from the amounts
computed by applying the U.S. federal income tax rate of 34 percent as
follows:
 2008
                    
                    
                    2007Income tax
      benefit at U.S. federal statutory rates
                    
                    $
                    (333,123
                    )
                    
                    $
                    (281,409
                    )Net operating
      losses not benefited
                    
                    
                    333,123
                    
                    
                    
                    281,409Common stock
      issued for services
                    
                    
                    -
                    
                    
                    
                    -State and
      local income taxes, net of federal income tax effect
                    
                    
                    -
                    
                    
                    
                    -$
                    -
                    
                    
                    $
                    -
 The
tax effects of temporary differences that give rise to significant portions of
the deferred tax assets at June 30, 2008 are presented
below:
 Deferred  tax  assets:Net  operating  losses
                    
                    $
                    7,700,000Less  valuation  allowance
                    
                    
                    (7,700,000
                    )Net  deferred  tax  assets
                    
                    $
                    -
 As
of June 30, 2008, the Company had net operating loss carryforwards of
approximately $7.8 million, $3.4 million and $10.2 available to offset future
taxable federal, state and foreign income, respectively. The federal and state
carryforward amounts expire in varying amounts between 2008 and 2028. The
foreign net operating loss carryforwards do not have an expiration
period.
  NOTE
5  -  BASIC  AND  DILUTED  LOSS  PER  COMMON  SHARE
  The
following is a reconciliation of the numerators and denominators of the basic
and diluted loss per common share computations for the years ended June 30, 2008
and 2007:
 2008
                    
                    
                    2007Numerator
      for basic and diluted loss per commonshare
      – net
      loss
                    
                    $
                    (854,161
                    )
                    
                    $
                    (721,562
                    )Denominator
      for basic and diluted loss per commonshare
      – weighted average shares
                    
                    
                    50,000,000
                    
                    
                    
                    50,000,000Basic and
      diluted loss per common share
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.01
                    )
 NOTE 6 -
RELATED PARTY TRANSACTIONS
  The
Company has an agreement with Professor Barnikol, the Company's President and
CEO, pursuant to which he is entitled to 3% royalties of gross revenues earned
with any product based on his inventions. No royalties were paid or earned in
fiscal 2008 and 2007.
  28
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE
7  -  COMMITMENTS  AND  CONTINGENCIES
  Indemnities
and Guarantees
  During
the normal course of business, the Company has made certain indemnities and
guarantees under which it may be required to make payments in relation to
certain transactions. These indemnities include certain agreements with the
Company's officers, under which the Company may be required to indemnify such
person for liabilities arising out of their employment relationship. The
duration of these indemnities and guarantees varies and, in certain cases, is
indefinite. The majority of these indemnities and guarantees do not provide for
any limitation of the maximum potential future payments the Company could be
obligated to make. Historically, the Company has not been obligated to make
significant payments for these obligations. The Company has recorded a reserve
for indemnities and guarantees of $-0- and $-0- as of June 30, 2008 and 2007,
respectively.
  Other
  On
April 14, 2005 the Company entered into a distribution agreement with an
unrelated third party.  According to the terms of the Agreement, the
Company granted exclusive marketing and distribution rights pertaining to the
Company’s Chitosan-based wound pads to the third party for a period of five
years.
  NOTE 8 -
STOCK-BASED COMPENSATION
  The
Company has applied the disclosure provisions of Statement of Financial
Accounting Standards No. 123(R), "Share
Based Payment,” for the years ended June 30, 2008 and 2007. Released on
December 16, 2004, SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting
for Stock Issued to Employees.” There were no common shares or stock options
issued or granted to employees during this reporting
period.
  On
April 28, 2004, the company adopted the 2004 Employee Stock Incentive Plan (the
Plan). Under the terms of this plan the Board was authorized to issue up to
1,000,000 shares of common stock to certain eligible employees of the company or
its subsidiaries.
  NOTE 9 -
NOTES PAYABLE
  During
the year ended June 30, 2008 and 2007, the Company borrowed money from four
separate European Companies in order 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 on the fifth
anniversary of its issuance at a rate of 5% simple interest.  The
Company has the right to convert these notes, including all unpaid principal and
any interest thereon, into shares of the Company’s Common Stock at any time
prior to full repayment or the Due Date. The total amount borrowed under these
terms, through June 30, 2008 was $140,499.
  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.
  29
 SANGUI
BIOTECH INTERNATIONAL, INC.
 Notes to
the Consolidated Financial Statements
 June 30,
2008
 NOTE 9 -
NOTES PAYABLE (Continued)
  Loan
Agreement with Feedback AG
  On
June 9, 2006, the Company entered into a loan agreement with Feedback AG. 
Dr. Christoph Ludz and Thomas Striepe are signatories for 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 loan agreement with Feedback AG. 
Dr. Christoph Ludz and Thomas Striepe are signatories for 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.
  Additional
Loans
  From
July 2006 to January 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.
  Agreements
with ERC Nano Med S.A. de C.V.
  On
October 13, 2006 the Company entered into a Distribution, Collaboration, and
Commercialization Agreement 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 exclusive distribution rights of its 1) hemospray, 2) wound cleaner
liquid gel, and 3) bloodadditiv to ERC.  In return, ERC is to work
with 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.
  On
the same date the Company entered into a separate agreement with ERC pertaining
to the Company’s chitosin wound pads under the same
terms.
  NOTE 10 –
PROMISSORY NOTES
  As
of June 30, 2008, the Company had $1,812,342 in outstanding promissory notes
payable.  These notes are convertible into common stock at conversion
rates of 0.09 to 0.13 and bear interest at a rate of 5.0 percent per
annum.
 30


ITEM  8.CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AN ACCOUNTING AND FINANCIAL
DISCLOSURE




On
September 18, 2007, the Board of Directors of the Company dismissed HJ &
Associates, LLC (“HJ & Associates”) as the Company's independent
auditors.HJ &
Associates audited report of the financial statements for the years ended June
30, 2005 and 2004, included language expressing substantial doubt as to the
Company's ability to continue as a going concern.  The audit report
contained no other adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting
principles.  As such, in connection with these audits of the fiscal years
ended June 30, 2005 and 2004 and the subsequent interim period prior to such
dismissal, there were (1) no disagreements with HJ & Associates on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of HJ & Associates, would have caused them to make reference
thereto in their reports on the financial statements for such periods to the
subject matter of the disagreement, and (2) there were no reportable events as
that term is defined in Item 304(a)(1)(iv) of Regulation S-B. The change in
independent accountants did not result from any dissatisfaction with the quality
of professional services rendered by HJ &
Associates.


On
September 18, 2007, the Company engaged of the accounting firm of Moore &
Associates, Chartered ("Moore & Associates") as its independent auditors,
effective immediately.  Moore & Associateshave been asked to
audit the Company's financial statements for the years ending June 30, 2006 and
2007.  During the two most recent fiscal years and the subsequent interim
periods prior to the engagement of Moore & Associates, the Company did not
consult with Moore & Associates with regard to: (i) the application of
accounting principles to a specific completed or contemplated transaction, or
the type of audit opinion that might be rendered on the Company's financial
statements; and further, Moore & Associates have not provided written or
oral advice to the Compnay that was an important factor considered by the
Company in reaching a decision as to any accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement or a reportable event (as described in Item 304(a)(1)(iv) of
Regulation S-B).
  The
decision to change principal auditors and the engagement of the new principal
auditor was recommended and approved by the Company's Board of
Directors.


ITEM
8A.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
Annual Report on Form 10-KSB.  Based on such evaluation, they have
concluded that as of such date, our disclosure controls and procedures are
ineffective and represent a material weakness.  Such controls are
designed to ensure that information required to be disclosed by us in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
applicable SEC rules and forms and that such information is accumulated and
communicated to our management, including CEO, President and CFO, to allow
timely decisions regarding required
disclosure.




(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.




ITEM
8B.OTHER
INFORMATION




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 $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.  Two of the Company's Directors are also signatories for Feedback
AG.  Pursuant to the terms of the loan agreement, Feedback AG loaned
the Company $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.






31





Second
Loan Agreement with Feedback
AG




On
July 21, 2006, the Company entered into a loan agreement with Feedback
AG.  Two of the Company's Directors are also signatories for 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.




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




On
October 13, 2006, the Company entered into a Distribution, Collaboration, and
Commercialization Agreement 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.




On
the same date the Company entered into a separate agreement with ERC pertaining
to the Company’s chitosin wound pads under the same
terms.




Additional
Loans to the
Company




During
the year ended June 30, 2007 and 2006, the Company borrowed money from four
separate European Companies in order 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 on the fifth
anniversary of its issuance at a rate of 5% simple interest.  The
Company has the right to convert these notes, including all unpaid principal and
any interest thereon, into shares of the Company’s Common Stock at any time
prior to full repayment or the Due Date. The total amount borrowed under these
terms, through June 30, 2007 was
$113,134.




Resignation
of Dr. Wolfgang Barnikol from positions of Chief Executive Officer and Chief
Financial Officer


On
March 30, 2008, Dr. Wolfgang Barnikol amicably resigned as the Company’s Chief
Executive Officer and Chief Financial Officer effective April 3, 2008.  Dr.
Barnikol's resignation was not due to any disagreement with the Company. 
Dr. Barnikol remains a
Director.
 Appointment
of Thomas Striepe as Chief Executive Officer
  On
April 8, 2008, the Board of Directors appointed Thomas Striepe to serve as Chief
Executive Officer of the Company.  He is a current Director of the
Company.  Mr. Striepe is the Vice President of Accounting and Controlling
at Feedback AG, Hamburg, Germany, a financial services company.  Prior to
joining in 2004, he held management positions in the accounting departments of
several German and international corporations.  He holds an MBA from
Hamburg University.  Mr. Striepe does not have an employment agreement with
the Company nor have the terms of a severance agreement with the Company been
finalized.
  Mr.
Striepe has no family relationships with any other director or executive officer
of the Company or any person nominated to become a director or executive officer
of the Company.  There are no arrangements or understandings between any of
the directors or executive officers, or any other person or person pursuant to
which they were selected as directors and/or
officers.
  Appointment
of Joachim Fleing as Chief Financial Officer
  On
April 8, 2008, the Board of Directors appointed Joachim Fleing to serve as Chief
Financial Officer of the Company.  He is a current Director of the Company.
Mr. Fleing is a communications specialist.  His professional experience
includes the position of a communications officer and the position as an account
director at an international PR agency.  Mr. Fleing holds a PhD from
Wuppertal University.  Mr. Fleing does not have an employment agreement
with the Company, nor have the terms of any severance agreement with the Company
been finalized and are thus not yet
available.
  Mr.
Fleing has no family relationships with any other director or executive officer
of the Company or any person nominated to become a director or executive officer
of the Company.  There are no arrangements or understandings between any of
the directors or executive officers, or any other person or person pursuant to
which they were selected as directors and/or
officers.
  Entry
into Letter of Intent with HemCon
  On
April 15, 2008 the Company signed a letter of intent with HemCon Medical
Techolologies, Inc. to develop technology relating to Chitosan wound care
products. The Company will license exclusive worldwide sales and marketing
rights in exchange for HemCon managing the submission of the Chitosan wound care
products to the United States Food and Drug
Administration.
  Sale
of Capital Securities in Wholly Owned Subsidiary
  On
April 25, 2008 the Company entered into letters of intent with various European
investors to sell 10% of the capital securities of its wholly owned subsidiary,
Sangui BioTech GmbH, for approximately 722,000 Euros. Payments for the purchase
were received in their entirety by the Company by May 16, 2008. The closing of
this transaction is subject to German Law and is anticipated to be complete
within eight weeks of filing with the German Register of Commercial Companies
scheduled for June 11, 2008 in Witten
Germany.
  One
of the investors in this transaction is the current Managing Director of the
wholly owned subsidiary; he is receiving his ownership interest in consideration
of past services rendered for the Company in the amount of 50,000
Euros.
  Resignation
of Director
  Subsequent
to the period covered by this report, on  September 30, 2008, Prof. Dr. Dr.
Wolfgang Barnikol submitted his resignation as a Director of the Board of
Directors of the Registrant, effective as of September 30, 2008. There were no
disagreements between the Registrant and Dr. Barnikol that led to his
resignation.
 32


PART
III




ITEM
9.DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT.




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




The
directors as of June 30, 2008 were as follows:




Name
            
            Age
            
            Positions
      and Offices
            Directorship
      Term
            Period
      of Service as a DirectorProf.
      Wolfgang Barnikol, M.D., Ph.D:
            
            73
            
            Former
      Chief Executive Officer, Chief Financial Officer, and
      Director*
            One
      Year
            Apr
      18, 2001Joachim
      Fleing, Ph.D.
            
            55
            
            Chief
      Financial Officer, Director*
            One
      Year
            Dec
      13, 2003Prof.
      Joachim Lutz, M.D., Ph.D.
            
            74
            
            Non-Executive
      Director
            One
      Year
            Aug,
      1997Thomas
      Striepe
            
            44
            
            Chief
      Executive Officer, Director*
            One
      Year
            Feb
      7, 2005


*In
April Prof Barnikol resigned from his Executive Officer positions.  Subsequent
to the period covered by this report, he also resigned from his position as a
Director of the company effective September 30, 2008. On
April 8, 2008, the Board of Directors appointed Thomas Striepe to serve as Chief
Executive Officer of the Company.  On April 8, 2008, the Board of Directors
appointed Joachim Fleing to serve as Chief Financial Officer of the
Company.  See Item 8B, Other
Information above.




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




The
Company has an agreement with Professor Barnikol, the Company’s former President
and CEO, pursuant to which he is entitled to 3% royalties of gross revenues
earned with any product based on his inventions (See below: Item 12 Certain
Relationships and Related Transactions).  No royalties were paid or
earned in fiscal 2008 and
2007.




Since
July, 2002, the Company has an agreement with Joachim Fleing under which the
latter serves as a communications specialist on an hourly
basis.




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


33
 The
business and working experience of the Directors and key Executive Officers of
SGBI as of June 30, 2008, are set out
below:




PROFESSOR
WOLFGANG K. R. BARNIKOL, M.D., Ph.D., has studied chemistry, physics and
medicine at the Universities of Munster, Aachen and Mainz, Germany. In 1961, he
received a Diploma in chemistry from University of Mainz, Mainz, Germany. In
1964, he obtained the doctorate in physical chemistry (Dr. rer. nat.) and in
1973 the doctorate in medicine (Dr. med.) both from the University of Mainz,
Mainz, Germany. In that same year, he also was appointed professor in medical
physiology at University of Mainz, Mainz Germany. In 1996, Dr. Barnikol was
awarded a specialist in medical physiology by the medical association of
Rheinland-Pfalz Germany. His research interest in physical chemistry focused on
the polymerization of styrene and the determination of molecular weights of
polymers with the electron microscope. Dr. Barnikol's research areas in medicine
are: (i) respiration; and (ii) blood and circulation. In the field of
respiration, he works on the functional analysis of the bronchial system and gas
exchange. Moreover, he is engaged in the development of respiratory and skin
oxygen sensors. In the field of blood and circulation, he works on the
development of artificial oxygen carriers for medical use, which are based on
polymerised soluble hemoglobins. As a third sphere of work, Dr. Barnikol is
engaged in the development of an implantable glucose sensor. Dr. Barnikol has
published more than 100 scientific articles, a textbook in physiology and a
review on the situation of German universities.




PROFESSOR
JOACHIM LUTZ, M.D., is a professor and lecturer in medical physiology in the
subject area of the vascular system and venous pressure at the Physiological
Institute of the Bavarian-Julius-Maximilian University in Wuerzburg until his
retirement in 1998. There he spent years evaluating artificial oxygen carriers
in small animal models such as the magneto metric determination of the
impairment of the body's own macrophages that are responsible for
detoxification. He is a member of the International Advisory Committee on Blood
Substitutes (ISABI) as well as the International Society on Oxygen Transport to
Tissue (ISOTT). He will accelerate development work as well as the pre-clinical
and clinical testing of blood with artificial oxygen carriers with his technical
knowledge and experience.




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




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




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




Significant
Employees




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




Directorships




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




Family
Relationships




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




Involvement
in Certain Legal
Proceedings




Subsequent
to the period covered by this report, on September 13, 2007, the District Appeal
Court of Dusseldorf, Germany (Oberlandesgericht Düsseldorf I 6 U 96/06) found
Prof. Dr. Dr. Wolfgang Barnikol jointly and severally liable in a civil suit to
Dr. Rainer Felfe, a shareholder of the Company, in the amount of approximately
700,000 euros (approximately US $952,000, which amount includes interest and
costs) for supporting the unethical selling of the Company's shares. This
judgment is enforceable, but has not yet become final and absolute as Dr.
Barnikol has submitted a petition of appeal to the Federal Supreme Court of
Germany (Bundesgerichtshof). The Company was not and is not a party to these
proceedings.  Additionally,on
September 2, 2008, the District Court of Dusseldorf (Landgericht Düsseldorf 7 O
299/04) found Prof. Dr. Dr. Wolfgang Barnikol jointly and severally liable in a
civil suit to a shareholder of the Company in the amount of approximately
150,000 euros (approximately US $204,000, which amount includes interest and
costs) for supporting the unethical selling of the Company's shares. This
judgment is enforceable, but has not yet become final and absolute. The Company
was not and is not a party to these proceedings.  OnSeptember
30, 2008, Prof. Dr. Dr. Wolfgang Barnikol submitted his resignation as a
Director of the Board of Directors, effective as of September 30, 2008 and onMarch 30, 2008, Dr. Wolfgang Barnikol amicably resigned as the Company’s
Chief Executive Officer and Chief Financial Officer effective April 3,
2008.  Dr. Barnikol's resignations were not due to any disagreement with
the Company.




Except
as set forth above, during the past five years, no present or former director,
executive officer or person nominated to become a director or an executive
officer of the
Company:




(1)           was
a general partner or executive officer of any business against which any
bankruptcy petition was filed, either at the time of the bankruptcy or two years
prior to that time;




(2)           was
convicted in a criminal proceeding or named subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);




(3)           was
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; or




(4)           was
found by a court of competent jurisdiction (in a civil action), the Securities
and Exchange Commission or the Commodity Futures Trading Commission to have
violated a Federal or state securities or commodities law, and the judgment has
not been reversed, suspended or vacated.




Audit
Committee and Audit Committee Financial
Expert




The
Company has no separately designated standing audit committee nor another
committee performing similar functions.  The Board of Directors acts
as the audit committee.  None of the directors qualifies as an Audit
Committee Financial Expert.




Material
Changes to The Method By Which The Shareholders May Recommend Nominees To The
Board Of
Directors




None.


34


Section
16 (a) Beneficial Ownership Compliance




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




Based
solely upon a review of copies of the reports filed, SGBI believes that during
the year ended June 30, 2007, that all executive officers, directors and persons
who own more than ten percent of the Company's Common Stock are in compliance
with such regulations.




Code
of Ethics




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




ITEM 10.EXECUTIVE
COMPENSATION AND OTHER INFORMATION




Summary
Compensation Table




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




Name
                    and
                    Principal
                    Position
                    (a)
                  Year
                    (b)
                  Salary
                    ($)
                    (c)
                  Bonus
                    ($)
                    (d)
                  Stock
                    Awards
                    ($)
                    (e)
                  Option
      Awards
                    ($)
                    (f)
                  Non-Equity
      Incentive Plan Compensation
                    ($)
                    (g)
                  Nonqualified
      Deferred Compensation Earnings
                    ($)
                    (h)
                  All
      Other Compensation
                    ($)
                    (i)
                  Total(1)
                    ($)
                    (j)Prof.
      Wolfgang (2)Barnikol
                    CEO,
      CFO
                  2008
                    2007
                    2006
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0Thomas
      Striepe
                    CEO
                  2008

                    2007
                    2006
                  0

                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0Dr. Joachim Fleing
      (3)
                    CFO
                  2008
                    2007
                    2006
                  5,954
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  0
                    0
                    0
                  5,954
                    0
                    0


(1)
            All
      figures are expressed in United States Dollars (“USD”); for the German
      management personnel, the EURO or DM was converted to USD as of the fiscal
      year end of each year.(2)
            In
      April, 2008, Prof Barnikol resigned from his Executive Officer positions.
       On April 8, 2008, the Board of Directors appointed Thomas Striepe to
      serve as Chief Executive Officer of the Company and Joachim Fleing to
      serve as Chief Financial Officer of the Company.  See Item 8B, Other
      Information above.(3)
            Compensation
      resulting from the communications service agreement. See Item 8B, Other
      Information above.




Narrative
Disclosure to Summary Compensation
Table




The
Company has an agreement with Professor Barnikol, the Company’s CEO and CFO,
pursuant to which he is entitled to 3% royalties of gross revenues earned with
any product based on his inventions (See below: Item 12 Certain Relationships
and Related Transactions).  No royalties were paid or earned in fiscal
2008 and
2007.




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




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




35





Outstanding
Equity Awards at Fiscal Year-End Table and
Narative




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




Compensation
of Directors




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




Name
              
              (a)
            Fees
      Earned or Paid in Cash ($)
              (b)
            StockAwards
              ($)
              (c)
            Option
      Awards
              ($)
              (d)
            Non-Equity
      Incentive Plan Compensation
              ($)
              (e)
            Nonqualified
      Deferred Compensation Earnings($)
              (f)
            All
      Other Compensation
              ($)
              (g)
            Total
              ($)
              (j)Prof. Wolfgang
      Barnikol (1)
            2008
              2007
              2006
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0Joachim
      Lutz
            2008
                2007
                2006
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0Thomas
      Striepe
            2008
                2007
                2006
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0Joachim
      Fleing
            2008
                2007
                2006
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0


(1)
              Subsequent
      to the period covered by this report, Prof Barnikol resigned from his
      position as a Director of the company.  See Item 8B, Other
      Information above


Narrative
to Director Compensation Table




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




Other
Contracts




None.






36





ITEM
11.SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS




Securities
Authorized for Issuance under Equity Compensation
Plans





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




Stock
Incentive Plan




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




Security
Ownership of Certain Beneficial Owners




As
of June 30, 2007 the Company is not aware of any person who is the beneficial
owner of more than 5% of the issued and outstanding Common Stock of the
Company.




Security
Ownership of Management




The
following table sets forth, as of June 30, 2007, certain information concerning
ownership of shares of Common Stock by each director of the Company and by all
executive officers and directors of the Company as a
group:




Title
      of Class
            Name
      and Address
              of
      Beneficial Owner
            Amount
      and Nature of Beneficial Ownership
            Percent
      of ClassCommon
      Stock
            Dr.
      Wolfgang Barnikol
              Arndstr.8
              58453
      Witten
              Germany
            1,853,600 (1)
            3.7
      %Common
      Stock
            Dr.
      Joachim Fleing
              Am
      Vogelherd 43
              35043
      Marburg
              Germany
            210,000
            0.4
      %Common
      Stock
            Joachim
      Lutz
              Alfred
      Herrhausen Street
      44
              58455
      Witten
              Germany
            0
            0.0%Common
      Stock
            Thomas
      Striepe
              Alfred
      Herrhausen Street
      44
              58455
      Witten
              Germany
            0
            0.0%Common
      Stock
            All
      Officers and Directors as a Group (4 persons)
            2,063,600
            4.1%




(1)
This amount includes 1,153,600 shares held in the name of Dr. Doris
Barnikol-Keuten, Dr. Wolfgang Barnikol’s
spouse.






37





Changes
In Control




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




ITEM
12.CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS




Transactions
with related
persons




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




Royalty
Arrangment With Professor Wolfgang
Barnikol




On July
7, 1997, SGBI entered into an agreement with Professor Barnikol pursuant to
which Professor Barnikol assigned certain patents to SGBI's German subsidiaries
in exchange for a 3% royalty on net revenues on products developed by
SanguiBioTech AG or GlukoMeditech AG based on those patents.  The
royalty expires in 20 years or upon expiration of the patents.  Upon
the merger of the two former subsidiaries and subsequently upon their conversion
into SanguiBioTech GmbH, this agreement was transferred to the respective new
legal
entities.




Consulting Contract
With Joachim Fleing,
PhD.




The
company signed a consulting contract with Joachim Fleing, PhD, covering certain
investor relations services on July 17, 2002. When the latter was appointed a
director of the company effective December 16, 2003, the Board of Directors
unanimously agreed that this contract should persist. Under this resolution
Joachim Fleing, like the other directors will not obtain any remuneration for
serving as a director, while those services as rendered under the contract
should be remunerated as
before.




Parents




Not
applicable.




Promoters
and Control
Persons




Not
applicable.






38





ITEM
13.EXHIBITS




(a) Index
to Exhibits




2.1
              Exchange Agreement
      between MRC Legal Services LLC and SanguiBioTech International, Inc.,
      dated of March 31, 2000 (1)3.1
              Articles of
      Incorporation of the Company (1)3.2
              Bylaws of the
      Company (1)4.1
              Stock Option
      Agreement between Professor Wolfgang Barnikol and Sangui Biotech
      International, Inc. (2)10.1
              Office Lease between
      Brookhollow Office Park and Sangui Biotech International, Inc. dated
      September 4, 1996 and as amended 2000 (3)10.2
              Fee Agreement
      between GlukoMeditech AG and Dr. Sieglinde Borchert dated June 15,
      1998 (2)10.3
              Fee Agreement
      between SanguiBiotech AG and Dr. Sieglinde Borchert dated June 15,
      1998 (2)10.4
              Service Contract
      between GlukoMeditech AG and Dr. Wolfgang Barnikol dated June 30,
      1998 (2)10.5
              Service Contract
      between SanguiBiotech AG and Dr. Wolfgang Barnikol dated June 30,
      1998 (2)10.6
              Service Agreement
      between Axel Kleinkorres Promotionsagentur and Sangui Biotech
      International, Inc. dated April 26, 1999 (2)10.7
              Amendment to Service
      Agreement between Axel Kleinkorres Promotionsagentur and Sangui Biotech
      International, Inc. dated August 18, 2000 (2)10.8
              Appropriation Notice
      from North-Rhine-Westphalia to GlukoMediTech AG dated November 30,
      1998 (2)10.9
              Appropriation Notice
      from North-Rhine-Westphalia SanguiBiotech AG dated November 30,
      1998 (2)10.10
              Lease Contract for
      Business Rooms between Research and Development Centre, Witten, Germany
      and GlukoMeditech AG dated June 6, 2000 (2)10.11
              Additional Agreement
      to Lease Contract between Research and Development Centre, Witten, Germany
      and GlukoMeditech AG dated June 7, 2000 (2)10.12
              Additional Agreement
      to Lease Contract between Research and Development Centre, Witten, Germany
      and SanguiBiotech AG dated June 7, 2000 (2)10.13
              Assignment of
      Patents and
      Royalty Agreement with Dr. Wolfgang Barnikol
      (3)10.14
              Prolongation Letter
      for SanguiBiotech AG Grants (4)16.1
              Auditor Letter from
      HJ & Associates, LLC (5)21.1
              Subsidiaries of the
      Company (6)31.01
              Certification of CEO
      Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith31.02
              Certification of
      CFO Pursuant to Rule 13a-14(a) and 15d-14(a), filed
  herewith32.01
              Certification
      Pursuant to Section 1350 of Title 18 of the United States Code, filed
      herewith
 _____________________________________________________________________________________________________________________
 (1) Filed as an
exhibit to the report on Form 8-K, filed on or about April 4, 2000
 (2)
Filed as an exhibit to the report on Form 10-KSB for period ended June 30,
2000, filed on
October 13, 2000 (3)Filed as
an exhibit to the amended report on Form 10-KSB/A for the period ended June 30,
2000, filed on November 20,
2000
 (4)
Filed as an exhibit to the report on Form 10-KSB for the period ended June
30, 2001, filed on
September 28,
2001
 (5)
Filed as an exhibit to the report on Form 8-K/A filed on October 9,
2007
 (6)
Filed as an exhibit to the report on Form 10-QSB for the period ended September
30, 2006, filed on June 10,
2008




39





ITEM
14.Principal
Accountant Fees and
Services.




Independent
Public
Accountants




The
Company’s independent accountants for the fiscal year ended June 30, 2008 and
June 30, 2007 were Moore & Associates, Chartered.




(a)           Audit
Fees.  For the fiscal year ended 2008, the aggregate fees
billed by Moore & Associates, Chartered for services rendered for the audits
of the annual financial statements and the review of the financial statements
included in the quarterly reports on Form 10-QSB or services provided in
connection with the statutory and regulatory filings or engagements for those
fiscal years were $16,000.




(b)           Audit-Related
Fees.  For the fiscal year ended 2008 fees billed by Moore
& Associates, Chartered , were an aggregate $0 for any audit-related
services other than as set forth in paragraph (a)
above.




(c)           Tax
Fees.  For the fiscal years ended 2008 and 2007, Moore &
Associates, Chartered did not bill any fees for tax compliance
services.  The auditors did not provide tax-planning advice for the
fiscal years ended 2008 and 2007.




(d)           All
Other Fees.  None.






40





SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report on Form 10-KSB to be signed on its behalf by the undersigned
hereunto duly
authorized.







SANGUI
BIOTECH INTERNATIONAL,
INC.




/s/
      Thomas
      Striepe
              Thomas
      Striepe
              Chief
      Executive Officer
      and  Director
            October
      15, 2008/s/
      Joachim
      Fleing
              Joachim
      Fleing, Ph.D
              Chief
      Financial Officer and Director
            October
      15,
      2008





In
accordance with the Exchange Act, this Report has been signed by the following
persons on behalf of the Company and in the capacities and on the dates
indicated.




Signatures
              Title
              Date/s/
      Thomas Striepe
                  Thomas
      Striepe
              Chief
      Executive Officer and Director
              October
      15, 2008/s/
      Joachim
      Fleing
                  Joachim
      Fleing, Ph.D
              Chief
      Financial Officer and Director
              October
      15, 2008/s/
      Joachim
      Lutz
                  Joachim
      Lutz, M.D.
              Director
              October
      15, 2008






41