UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the annual period ended JUNE 30, 2002

( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 For the transition period from _____________ TO ______________

For the fiscal year ended June 30, 2002
Commission file number 0-21271

                       SANGUI BIOTECH INTERNATIONAL, INC.
        (Exact name of small business issuer as specified in its charter)

             Colorado                                   84-1330732
   (State or other jurisdiction of          (IRS Employer Identification Number)
    incorporation or organization)

  1508 Brookhollow Drive, Suite 354                        92705
                                                           -----
        Santa Ana, CA  92705                             (Zip Code)
  (Address of principal executive offices)

Issuer's telephone number, including area code         (714) 429-7807



                           Common Stock, no par value
                           --------------------------

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act of 1934 during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

Yes [x] No [  ]

Check whether there is no disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-B in this  Form,  and  will not be  contained,  to the best of
Registrant's  incorporated  by  reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]

The issuer's revenue for the fiscal year ended June 30, 2002 was $571,742.

The market value of the voting stock held by  non-affiliates of the issuer as of
September 13, 2002 was approximately $7,531,000.

The number of shares of the common stock  outstanding  as of September  13, 2002
was 40,655,363.

Documents incorporated by reference: None.

Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]



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<PAGE>




Table of Contents


PART 1.  ..............................................................   3

ITEM 1.  DESCRIPTION OF BUSINESS.......................................   3

ITEM 2.  PROPERTIES....................................................  17

ITEM 3.  LEGAL PROCEEDINGS.............................................  17

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........  17

PART II  ..............................................................  17

ITEM 5.  MARKET FOR SGBI'S SECURITIES..................................  17

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS...........................  18

ITEM 7.  FINANCIAL STATEMENTS..........................................  20

         CONSOLIDATED BALANCE SHEET....................................  22

         CONSOLIDATED STATEMENTS OF OPERATIONS AND
         COMPREHENSIVE LOSS............................................  23

         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY...............  24

         CONSOLIDATED STATEMENTS OF CASH FLOWS.........................  26

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................  27

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL  DISCLOSURE..........................  37

PART III ..............................................................  37

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS..............................  37

ITEM 10. EXECUTIVE COMPENSATION AND OTHER INFORMATION..................  40

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  40

ITEM 12. CERTAIN TRANSACTIONS..........................................  41

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..............................  42






                                       2
<PAGE>





PART 1
------

FORWARD LOOKING STATEMENT

This Annual Report contains forward-looking  statements concerning,  among other
things,  the  Company's  prospects  affecting  our  potential  and our  business
strategies.

These forward looking statements involve risks and uncertainties. Actual results
may differ  materially  from those predicted by the  forward-looking  statements
because of various factors and possible events,  including those discussed under
Risk  Factors.  Because  these  forward  looking  statements  involve  risks and
uncertainties,  actual results may differ  significantly from those predicted in
these forward looking  statements.  These statements may be accompanied by words
such as believe, estimate,  project, expect, anticipate, or predict that conveys
the  uncertainty  of future events or outcomes.  These  statements  are based on
assumptions  that the Company  believes are  reasonable;  however,  many factors
could cause the Company's actual results in the future to differ materially from
the  forward-looking  statements  made herein and in any other documents or oral
presentations  made by, or on behalf of, the Company.  Important  factors  which
could cause actual results to differ  materially  from those in  forward-looking
statements  include,  among others, the ability to obtain additional  financing,
which is not assured; rapid technological  developments and changes; problems in
developments  of the  Company's  products;  price  and  product  competition  by
competitors; general economic conditions; and factors discussed in the Company's
SEC filings.

ITEM 1. DESCRIPTION OF BUSINESS

HISTORY

Sangui BioTech,  Inc. (SBT) was  incorporated in Delaware on August 2, 1996, and
began  operations in October 1996. In August 1997,  Citadel  Investment  System,
Inc. (Citadel), a publicly held company,  acquired one hundred percent (100%) of
the  outstanding  common  shares of SBT; as a result,  SBT became a wholly owned
subsidiary of Citadel.  Thereafter,  Citadel  changed its name to Sangui BioTech
International, Inc. (the Company or SGBI). The Company's business operations are
conducted  through  four  subsidiaries:   SBT,  SanguiBioTech  AG  (Sangui  AG),
GlukoMediTech  AG (Gluko AG),  and Sangui  Biotech  Singapore  Pte Ltd.  (Sangui
Singapore).

SBT has  been  principally  engaged  in the  development  and  manufacturing  of
immunodiagnostic  kits,  which  were sold by SBT in niche  markets in the United
States and  Europe.  SBT is located in Santa  Ana,  California.  The  California
laboratory  facility,  approximately  3,360  square  feet,  has been  devoted to
immunodiagnostic research, development, manufacturing, and marketing, as well as
the Company's administrative  functions.  Subsequent to the June 30, 2002 fiscal
year-end SBT sold the assets, and commenced the wind-down,  of the U.S. business
operation.

Sangui AG was  established  and  organized  under the laws of  Germany in Mainz,
Germany,  on November  25,  1995.  Sangui AG is in the  business  of  developing
haemoglobin-based  artificial oxygen carriers as blood additive and blood volume
substitutes  and products  thereof.  Sangui AG is also  developing an anti-aging
cosmetic based on the  artificial  oxygen  carrier.  The officer of Sangui AG is
Professor Wolfgang Barnikol,  M.D., Ph.D. The members of Sangui AG's supervisory
board are Professor  Joachim Lutz,  M.D.,  Dora Malek,  attorney-at-law,  Oswald
Burkhard, M.D., Ph.D., Edgar Fritschi, Ph.D. and Doris Barnikol-Keuten, Ph.D.

Gluko AG was  established  and  organized  under the laws of  Germany  in Mainz,
Germany,  on July 15,  1996.  Gluko AG is  developing  a  long-term  implantable
glucose sensor,  by-products  thereof,  and sensors.  The officer of Gluko AG is
Professor Wolfgang  Barnikol,  M.D., Ph.D. The members of Gluko AG's supervisory
board are Dora Malek,  attorney-at-law,  Oswald Burkhard, M.D., Ph.D., Professor
Joachim Lutz, M.D., Edgar Fritschi, Ph.D. and Doris Barnikol-Keuten, Ph.D.

Since April 1998,  the  facilities  of Sangui AG and Gluko AG,  about 800 square
meters, are located on the premises of the Forschungs- und Entwickungszentrum of
the University of Witten/Herdecke, Witten, Germany.

Sangui Singapore was incorporated in Singapore on May 15, 1999. Sangui Singapore
is the Asia  regional  office for the Company and is engaged in the  business of
carrying out research and development  projects as well as animal experiments in
conjunction  with the German  subsidiaries.  The  premises of Sangui  Singapore,
about 350 square  meters,  are located in the Science Park II, Gemini  Building,
Singapore.

                                       3
<PAGE>

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

To date, neither SGBI nor any of its subsidiaries has had profitable operations.
The Company has never been profitable and,  through June 30, 2002, the Company's
accumulated deficit exceeded $ 16.1 million.  The Company expects to continue to
incur  substantial and increasing losses over at least the next several years as
it  expands  its  research  and  development  efforts,  testing  activities  and
manufacturing  operations.  All  of  the  Company's  potential  products  are in
development.  The Company will need to obtain substantial  additional capital to
fulfil its business plan.

The Company has adopted a program aimed at cost reductions and at refocusing the
Company's  funds to accelerate  time to market for its most promising and mature
products.  No  assurance  can be  given  that  the  Company's  program  will  be
successful.



                                       4
<PAGE>

BUSINESS OF THE COMPANY

The Company's  mission is the  development of novel  proprietary  products.  The
Company  aims at  marketing  and selling all or some of these  products  through
partnerships with industry partners.

The  special  focus of Sangui AG is on  developing  oxygen  carriers  capable of
support  of oxygen  transport  in humans in cases of acute and  chronic  lack of
oxygen due to arterial occlusion, anemia or blood loss due to surgery, accident,
or other causes. The Company is engaged in the development and commercialization
of such artificial oxygen carriers by reproducibly  synthesizing polymers out of
native  haemoglobin of defined molecular sizes. The Company also develops oxygen
carriers for external application in the medical and cosmetic fields in the form
of jellies and emulsions for the regeneration of the skin.

The  second  important  project  pertains  to Gluko  AG's long term  implantable
glucose sensor for day and night  monitoring of a patient's  glucose level.  The
project is designed to obviate the need for  persistent  blood  sampling  and to
provide  required  information on a continuous  basis,  which could minimize the
harmful effects of peaks and troughs in the patient's blood sugar level. A short
term insertable glucose sensor is also in development.

SBT has  completed  the  development  of nine in vitro  diagnostics  kits.  Five
products  have been  cleared for  marketing  by the United  States Food and Drug
Administration  ("FDA"). The other four kits were sold overseas with Certificate
of  Exportability  from the FDA. In December  2000,  Axis/Shields  ASA, a Norway
corporation  (Axis),  filed a lawsuit  against  Sangui USA alleging  that Sangui
USA's  Carbohydrate-Deficient  Transferrin  ("CDT")  test kit,  which is used to
detect chronic alcohol abuse, constituted an infringement of patent rights owned
by Axis. In March 2001, a settlement  was reached and Sangui USA agreed to cease
manufacture and sale of the CDT test kit. Sangui USA subsequently designed a new
test kit which was then  manufactured  and sold.  In December  2001,  Axis filed
another  lawsuit  in the  U.S.  District  Court  for  the  Central  District  of
California  against  Sangui USA alleging that the new test kit also infringed on
Axis' patent  rights.  Sangui USA filed an answer denying the claims of Axis and
counterclaimed  against Axis for a  declaratory  judgment of  invalidity  of the
patent of Axis and for antitrust  violations.  Because of the substantial  funds
required to defend itself  against the lawsuit filed by Axis,  despite of a high
probability  of not being found  infringing the patent held by Axis, the Company
decided to offer its CDT business for sale to Axis. In July,  2002, an agreement
was entered with Axis and the Company,  according to which the Company agreed to
cease to sell CDT kits among other intangible information for a consideration of
U.S. $100,000 paid by Axis to the Company. As a result of this settlement,  Axis
caused a dismissal  with  prejudice of all its claims,  and the Company caused a
dismissal with prejudice of the Company's counterclaim. In summary, this lawsuit
from  Axis  has been  resolved.  Further,  with  the loss of sales  from its CDT
business,   which  was  expected  to  negatively  impact  its  immunodiagnostics
business, Sangui also decided to discontinue its small in vitro immunodiagnostic
operations  in the United  States by the end of September  2002,  so that it can
focus its resources on the product development projects in Germany.


ARTIFICIAL OXYGEN CARRIER

Sangui develops  several  products based on polymers of purified natural porcine
haemoglobin with oxygen carrying abilities similar to native haemoglobin.  These
are (1) oxygen  carrying  blood  additives and (2) oxygen  carrying blood volume
substitutes.

In December 1997 the Company decided that porcine  haemoglobin should be used as
basic material for its  artificial  oxygen  carriers.  In March 1999 the Company
came to the fundamental  decision as to which  haemoglobin  hyperpolymer will go
into preclinical  investigation and that  glutaraldehyde  will be taken as cross
linker and the  polymer  haemoglobin  is  chemically  masked to prevent  protein
interaction  in  blood  plasma.  The  fine  adjustment  of  the  formula  of the
artificial  oxygen  carriers - optimized for laboratory  scale  production - was
finalized in Summer 2000.

The experiments completed in the Company's laboratories  demonstrated that it is
possible to polymerize  haemoglobins  isolated  from porcine blood  resulting in
huge  soluble  molecules,  so-called  hyperpolymers.  In August 2000 the Company
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 the  Company's  clean room.  At present the Company is working on
the upscale  process for  preparation  of a large  amount of oxygen  carrier for
preclinical and clinical trials.

                                       5
<PAGE>


OXYGEN CARRYING BLOOD ADDITIVE AND BLOOD VOLUME SUBSTITUTE

The need for oxygen carrying blood volume substitutes is growing because of: (i)
reduced  willingness of the population to give blood; and (ii)  contamination of
donors with HIV and hepatitis viruses.  The worldwide market for stored blood is
estimated to total about US $ 5 billion per year.


In cases where the native blood oxygen  carrier  system does not deliver  enough
oxygen to tissues of the heart, brain, extremities,  kidneys and other organs or
to cancer tumors, a critical clinical  situation arises requiring another oxygen
carrier  strategy.  In these  cases,  the  patients  do not have a blood  volume
deficiency,  but suffer from an oxygen deficiency. To compensate for this oxygen
deficiency,  an  artificial  oxygen  carrier  must be added  to the  circulatory
system.  Such an additive must not have any  influence on the oncotic  pressure,
i.e., it must have a negligible oncotic pressure as compared to plasma, which is
about  35hPa.  Sangui  AG  has  polymerized   various   hyperpolymers  in  small
quantities,  as described above, with  characteristics  such as sufficiently low
viscosity  and a negligible  oncotic  pressure at the desired  concentration  in
blood plasma.


The  management  of Sangui AG believes  that the additive  feature of the oxygen
carrier under development,  could potentially address a market possibly equal or
even larger than that of blood volume substitutes. It has been reported that the
oxygenation  of solid  tumors  makes  them  more  sensitive  to radio  and chemo
therapy.  Management  believes that its blood additive  technologies,  for which
there are no known competitive products, could be very attractive in the medical
field.
According to regulatory requirements, all drugs have to pass through preclinical
and  clinical   trials  before   approval  (e.g.  FDA  approval:   Federal  drug
administration) and launching to the market.  Management of the Company believes
that the European and FDA approval process will take at least several years.


OXYGEN CARRIERS FOR REGENERATION OF THE SKIN

The healthy skin is supplied  with  oxygen,  both through the supply from inside
and also through diffusion from outside.  Lack of oxygen will cause degenerative
alterations of various  extent,  ranging from premature  aging to surface damage
and open  wounds.  The  cause  for the lack of oxygen  may be the  normal  aging
process, but also burns or radiation.  Impairment of the blood flow, for example
caused by diabetes  mellitus,  can also lead to  insufficient  oxygen supply and
resulting skin damage.

The new haemoglobin-based  preparations under development by Sangui AG have been
designed to contribute to supporting the  regeneration  of the skin by improving
its oxygen  supply.  In addition to the  therapy,  these  preparations  are also
intended for purposes of prevention, among others for the improved oxygen supply
of the skin in the  course of a  radiation  therapy  or in the course of an acne
treatment.  The key product the Company  currently  focuses on is an  anti-aging
application for the cosmetics market.

The Company had, in fiscal year 2002,  finalized the development of an external,
cosmetic  application of its oxygen carrier. The Company has established contact
with a  German  cosmetics  vendor  and is  planning  and  preparing  to  jointly
introduce this application as a cosmetic anti-aging product in the German market
in fiscal year 2003.

GLUCOSE SENSOR

Over 5% of the inhabitants of the industrialized countries suffer from diabetes.
About one tenth of these patients are afflicted  with diabetes  mellitus Type 1,
which  means  they are  dependent  for  life on the  parenteral  application  of
insulin.  In  addition,  about 10 % of the Type II  diabetics  also get  insulin
dependent  during the course of their  illness.  Type II diabetics are patients,
where the body either  fails to produce  sufficient  insulin or the cells do not
respond to insulin.

The central  problem of the diabetic is to properly and  constantly  measure the
blood glucose level,  ideally 24 hours a day, and thereby to know how to adjust,
quantitatively,  the glucose level in the tissues by administering  insulin, for
example,  in order to  stabilize  the blood sugar level at its normal value of 1
g/L.

                                       6
<PAGE>

A glucose  level  which  remains  too low over long  periods of time  results in
damage to organs with high metabolism,  such as the brain. Brain cells which die
cannot be replaced.  If a glucose level remains too high,  the typical long term
sequelae of Type I diabetes occur, such as peripheral  circulatory  deficiencies
resulting in the need for amputation of extremities and detachment of the retina
resulting in blindness.

Accordingly,  it should be of substantial advantage to be able to constantly and
automatically  monitor  the blood  sugar  level of the  patient.  To do so,  the
glucose  monitor must stay at or in the patient for a long period of time making
the procedure cost effective and  efficacious.  Problems of infection,  comfort,
and the risk of detachment should all favor a permanently implantable sensor.

The glucose sensor being  developed by the Company is based on physical  methods
for  the  determination  of  the  diabetic's   glucose  level.   Three  physical
measurement  systems have been  developed for the glucose  detection  system:  a
polarimetric,  an infrared  system,  and a refractometric  system.  Two of these
measuring  systems  are  going to be used in the  glucose  sensor  jointly,  but
independently   to  increase  the   specificity  and  accuracy  of  the  glucose
determination.  The  sensor  communicates  via  radio  signals  with  a  control
panel/modem  outside  the body  and  supplies  the  patient  with the  necessary
information.  In  combination  with a  dosage  pump  for  insulin  (internal  or
external) an  artificial  beta-cell  for insulin  dependent  diabetics  could be
realized.  Until now, an implantable glucose sensor has been the missing link in
the development of a beta cell for the automatic dispensation of insulin.

Gluko AG presented a first model of a long-term  implantable  glucose  sensor at
the  Duesseldorf  MEDICA Show in November  1998.  The  Company  demonstrated  an
improved  model  comprised of a miniaturized  optical  system (which  includes a
light source, diodes, light detectors and an integrated sensor electronics which
has not  been  finally  miniaturized  yet)  at the  Duesseldorf  MEDICA  Show in
November 1999. In August 2000,  the Company stated a further  development of its
concept for the long term implantable glucose sensor which offers the Company an
additional  possibility  to also  develop an  insertable  sensor for the initial
clinical  adjustment  of  diabetics.  In  fiscal  year  2002  Gluko AG had STEAG
Microparts GmbH of Dortmund, Germany, carried out a development project aimed at
miniaturizing  the sensor in silicon hybrid technology and prove the possibility
of creating and producing such devices in industrial quantities. Phase 1 of this
project was successfully accomplished in April, 2002.

German  insurance  companies have  estimated the possible  savings for a patient
with Type I diabetes to range from  between  approximately  $6,000 to $8,000 per
annum.  Based on a unit  price of about  $7,000,  the market  potential  for the
developed countries could amount to several billion dollars per year.

According to regulatory  requirements,  all medical devices have to pass through
clinical trials before approval (e.g. FDA approval) and launching to the market.
Unlike the Company's  oxygen carriers that are classified  under  pharmaceutical
products, glucose sensors are classified as medical devices and have a different
approval  process.  The  clinical  trials  for the  glucose  sensor  do not have
different phases and entails doing studies immediately with diabetic patients.

Management of the Company  believes that European and FDA approval  process will
take at least several years for the implantable glucose sensor.



PUBLIC GRANTS

Sangui AG and Gluko AG have  received  grants from the  government of the German
state of Northrhine-Westphalia supporting their respective development projects.
These grants are designed to cover 40% of ongoing  development costs and require
the Company's economic ability to cover 60% of the project costs on its own. The
grant for Sangui AG originally  amounted to $2.1 million and the grant for Gluko
AG originally amounted to $2.3 million.

Based on research and development  expenditures and capital expenditures through
June 30,  2000,  the Company had  qualified  for  approximately  $818,000 of the
grants. In fiscal 2001, the Company recorded  approximately $348,000 and $76,000
of research and development expenditures and capital expenditures, respectively.
In fiscal  2002,  the Company  recorded  approximately  $379,000  and $62,000 of
research and development  expenditures and capital  expenditures,  respectively.
The grants  received  are  primarily  recorded  as a reduction  of research  and
development costs, with a smaller amount recorded as reduction of the historical
cost of certain property and equipment.

An additional  condition of the grant is that if the product is developed before
2003, it must be produced in the German state of Northrhine-Westphalia.


                                       7
<PAGE>

PATENTS AND PROPRIETARY RIGHTS

The  Company  has the  policy of  seeking  patents  covering  its  research  and
development  and  all  modifications  and  improvements   thereto.   The  German
subsidiaries  Sangui AG and Gluko AG have been  granted  18  patents 12 of which
cover  Germany,  3 the USA and one  each  Germany  plus the  USA,  Germany  plus
Singapore,  and  several  European  countries,  respectively.  Furthermore,  the
subsidiaries  have  applied  for 24  patents  most of which  have been  filed in
Germany,  the USA and as an international  patent  application with the European
Patent Office,  respectively.  Four patent  applications are related to progress
made  in the  final  development  stages  of  the  external  application  of the
artificial oxygen carriers.


MARKETING AND DISTRIBUTION

Other than the immunodiagnostic  products,  the Company has not yet manufactured
any of its products in commercial quantities.

The Company has limited  experience in sales and  marketing of products.  It is,
therefore,  dependent  on  attracting  industrial,  marketing  and  distribution
partners in order to succeed in selling its products in the respective markets.

GOVERNMENT REGULATION

SGBI and its subsidiaries  are, and will continue to be, 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.
Because of the nature of the operations of SGBI and its subsidiaries and the use
of  hazardous   substances  and  their  ongoing  research  and  development  and
manufacturing  activities,  SGBI and its  subsidiaries  are subject to stringent
federal,  state and local laws,  rules,  regulations and policies  governing the
use,  generation,  manufacturing,  storage,  air emission,  effluent  discharge,
handling and disposal of certain  materials and wastes.  Although it is believed
that SGBI and its  subsidiaries  are in material  compliance with all applicable
governmental and environmental laws, rules,  regulations and policies, 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  current  or future  environmental  laws,  rules,  regulations  and
policies,  or by liability  occurring  because of any past or future releases or
discharges of materials that could be hazardous.

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 FDA, and
corresponding  state  regulatory  agencies.  Additionally,  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,   labeling,  storage,  record  keeping,  approval,   advertising,
distribution  and promotion of biological  health care products.  Non-compliance
with  applicable   requirements  can  result  in,  among  other  things,  fines,
injunctions,  seizures  of  products,  total or  partial  suspension  of product
marketing, 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  the  Company  is  highly
competitive, and SGBI expects competition to increase

OXYGEN CARRYING BLOOD ADDITIVE

In the  business of blood  additive,  Sangui AG is not aware of any  existing or
potential competitors.

                                       8
<PAGE>

OXYGEN CARRYING BLOOD VOLUME SUBSTITUTE

In the  business  of blood  volume  substitute,  there  are at least  six  large
companies that have obtained  substantial  capitalization  either through equity
funding  or  through   acquisition  by  large   corporations,   such  as  Baxter
International acquiring Somatogen. Other future competitors include Hemosol Inc.
in Canada,  Northfield,  Alliance Pharmaceutical and Biopure Corporation.  To be
competitive,  the  Company  is  attempting  to  develop  well-characterized  and
differentiated  products in unique  formulations which could capture some of the
market as a new generation of oxygen carrier/additives to address the markets of
artificial  blood  volume  substitutes  as well as the  potential  new market of
therapeutics for oxygen deficiencies.

GLUCOSE SENSOR

The Company is not aware of any glucose sensing implants currently available. In
the last few years  different  approaches  have been chosen by companies to find
alternative ways to determine the blood glucose level.

The sensor under development by Synthetic Blood International,  Kettering, Ohio,
USA is based on an enzymatic glucose  determination.  Cygnus Inc., Redwood City,
California,  USA, for  example,  has been  developing  a device  which  collects
interstitial  fluid at the diabetic's  wrist by use of electrical  energy.  They
have received FDA approval for this technology in 2001.

In 2001,  Medtronic,  Inc  acquired  MiniMed  Inc.  of Sylmar,  Ca, and  Medical
Research  Group,  LLC. They have been merged to form Medtronic  MiniMed in 2001.
This company pursues the  developments  previously  started by both  predecessor
companies.  Their  implantable  long term glucose sensor has undergone  clinical
test for 14 months  now and  tests are  underway  as to  whether  it can be used
jointly  with  the  insulin  pump  developed  by  MiniMed.  MedTronic  Minimed's
insertable glucose sensor is being used in clinics in the US and abroad already.


                                       9
<PAGE>

RISK FACTORS

An investment in SGBI  involves  significant  risks  associated  with  economic,
business,  market and financial factors and developments  which may have adverse
impacts on the Company's future  performance,  including  significant  risks not
normally  associated  with  investing  in equity  securities  of  United  States
companies including the following:

LIMITED OPERATING HISTORY OF THE COMPANY; LOSSES ARE EXPECTED TO CONTINUE

The Company is a  relatively  new entity with a limited  operating  history upon
which a  significant  evaluation of the  Company's  prospects  can be made.  The
prospects of SGBI must be considered  keeping in mind the risks,  expenses,  and
difficulties frequently encountered in the establishment of a new business in an
ever changing industry and the research, development, manufacture, distribution,
and commercialization of esoteric medical technology,  procedures,  and products
and related technologies. There can be no assurance that unanticipated technical
or other  problems  will not occur  which  would  result in  material  delays in
product  commercialization or that the efforts of SGBI will result in successful
product  commercialization.  SGBI has been  operating  at a loss and expects its
costs to increase as its development efforts and testing activities  accelerate.
It is currently unknown when profitable operations might be achieved.

FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING

Although  management  believes  that  the  Company's  cash  position  should  be
sufficient to cover its financing for at least another fiscal year,  substantial
funds will be required to effect the Company'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 those
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  the  Company'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
the technologies or product  candidates.  The inability of the Company to access
the capital markets or obtain acceptable financing could have a material adverse
effect on the results of  operations  and  financial  condition  of the Company.
Moreover,  if funds are not available  from any sources,  the Company may not be
able to continue to operate.


DEPENDENCE ON KEY PERSONNEL

The  future  success  of the  Company  will  depend  on the  service  of its key
scientific   personnel  in  its   pharmaceutical,   chemistry  and  biochemistry
departments and, when appropriate,  computer hardware and software  engineering,
electrical   and   mechanical   engineering   and   management   personnel  and,
additionally,  its ability to  identify,  hire and retain  additional  qualified
personnel.  There is intense competition for qualified personnel in the areas of
the  activities of SGBI 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  that  suitable
replacement personnel will be available.


                                       10
<PAGE>

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 copyrights or other similar
rights 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 copyrights or similar rights.  In the event SGBI or its subsidiaries is
challenged by the holders of such copyrights or other similar 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  commercialization  or  significantly
increased costs. In addition,  there can be no assurance that those products and
technologies  will prove to be  sufficiently  reliable or durable in wide spread
commercial  application.  The products or technologies sought to be developed by
SGBI will be the result of  significant  efforts which may result in errors that
become apparent subsequent to widespread commercial utilization.  In such event,
SGBI would be required to modify such products or technologies and continue with
additional  research  and  development,  which could delay the plans of SGBI and
cause SGBI to incur additional cost.


                                       11
<PAGE>

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

All products and technologies under development by SGBI will require significant
commitment of personnel and financial  resources.  Several products will require
extensive  evaluation  and  pre-marketing  clearance  by the FDA 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.

The  technologies of SGBI have not yet been tested in humans and 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 or
efficacious.  Potential  products  based on the  technologies  of SGBI are at an
early stage of testing and there can be no assurance  that such products will be
shown to be safe or effective.

MARKET ACCEPTANCE

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

GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL

The clinical  testing,  manufacture,  promotion,  and sale of biotechnology  and
pharmaceutical   products  are  subject  to  extensive  regulation  by  numerous
governmental  authorities  in  the  United  States,  principally  the  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 under 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.
Noncompliance  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
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
the Company 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.
                                       12
<PAGE>
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 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.


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.

                                       13
<PAGE>


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 and pharmaceutical industries is intense and is
expected  to  increase.  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. 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.   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
Sangui 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.

In  December,   2001,  the  Company's  only  competitor  in  the  CDT  business,
Axis/Shields,  a Norwegian  Company  purchased by Shields  Diagnostics of United
Kingdom,  filed a lawsuit  against the Company for alleged patent  infringement.
The Company reached a settlement with Axis/Shields in which the Company sold the
Company's CDT business to Axis/Shield.

Many of the competitors of SGBI 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.

                                       14
<PAGE>


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

RISK OF PRODUCT LIABILITY; POTENTIAL UNAVAILABILITY OF INSURANCE

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

UNCERTAINTIES RELATING TO PRICING AND THIRD-PARTY REIMBURSEMENT

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

                                       15
<PAGE>

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.  Its
subsidiaries will be engaged in manufacturing pharmaceutical products which will
be subject to stringent regulatory requirements.  No assurance can be given that
its  subsidiaries,  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  efforts 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.  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 it were
unable  to use its  manufacturing  facilities  as a  result  of a fire,  natural
disaster (including an earthquake), 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 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.

HAZARDOUS MATERIALS AND ENVIRONMENTAL MATTERS

The research and development  processes of SGBI involves the controlled storage,
use and disposal of  hazardous  materials  and  radioactive  compounds.  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 and SGBI  intends to  manufacture  commercial
quantities  of its products.  Although SGBI 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.

DEPENDENCE ON MAJOR CUSTOMERS

Since the Company sold its CDT business to Axis/Shield in July,  2002,  there is
no longer a customer base.

                                       16
<PAGE>


HUMAN RESOURCES

The Company  considers its relations  with its employees to be favorable.  As of
June 30, 2002 the  Company and its  subsidiaries  had 30 fulltime  employees  of
which 22 were involved in research and  development  and 8 were  responsible for
administrative   matters.  The  Company  had  consulting   arrangements  with  6
individuals as of that date.  Contracts  with three  employees are due to expire
during the first quarter of fiscal 2003.

ITEM 2. PROPERTIES

The Company's US laboratory facility consists of approximately 3,360 square feet
located in Santa Ana,  California.  Rent  expense for the fiscal year ended June
30, 2002 was approximately $51,000 with a lease to expire in December, 2002.


The  German  subsidiaries,  approximately  800 square  meters,  are based in the
Forschungs- und Entwicklungszentrum of the University Witten/Herdecke,  Germany.
Rent expense for the fiscal year ended June 30, 2002 was approximately $100,000.

The Singaporean  subsidiary,  approximately  350 square meters,  is based in the
Science Park II,  Gemini  Building.  Rent expense for the fiscal year ended June
30, 2002 was approximately $59,000.

ITEM 3. LEGAL PROCEEDINGS

On July 26,  2001,  the Company  filed a lawsuit in the United  States  District
Court for the  District of Colorado  against  Helmut  Kappes,  a director of the
Company.  In the  lawsuit,  the Company  alleges  that Mr.  Kappes is engaged in
conduct  related to the Company's  affairs that is  fraudulent,  dishonest and a
gross abuse of his  authority or  discretion  as a director and that his removal
from the  Company's  Board of  Directors  would be in the best  interest  of the
Company.  Among other  things,  the Company  alleges that Mr.  Kappes caused the
Company  to  enter  into a  contract  with  Axel  Kleinkorres  without  adequate
disclosure of Mr. Kappes's  conflicts of interest and that the remuneration paid
to Mr.  Kleinkorres  was excessive.  The Company also alleges that Mr. Kappes is
engaged in an improper  exchange offer campaign  involving the Company's shares.
The Court issued a Temporary  Restraining  Order  suspending Mr. Kappes from the
Board of Directors of the Company and  restraining  Mr. Kappes from pursuing the
exchange offer.  The Temporary  Restraining  Order has expired.  The Company has
filed a Motion for  Preliminary  Injunction.  The  Company  seeks the  permanent
removal of Mr.  Kappes from the  Company's  Board of  Directors,  an  injunction
against Mr. Kappes and his affiliates from  exchanging the Company's  shares for
shares of an entity in which Mr. Kappes has a financial  interest,  compensatory
damages in an amount to be  determined  and costs of the action.  Mr. Kappes has
filed an answer denying the Company's claims.

In September 2002, Mr. Kappes' wife, Kerstin Kappes, and Petra  Schwab-Kutscher,
the  wife of Axel  Kutscher,  who is a former  director  of the  Company  and an
associate of Mr. Kappes, commenced an action in the United States District Court
for the District of Colorado  against the Company and its  attorneys for alleged
wrongful  refusal  to permit  Mrs.  Kappes and Mrs.  Kutscher  to  transfer  the
Company's stock. Mrs. Kappes and Mrs.  Schwabe-Kutscher have sworn under oath as
of August 15, 2002,  that they  currently  have a buyer in  Switzerland,  who is
ready,  willing and able to purchase all of their Company's  stock.  Mrs. Kappes
and Mrs.  Kutscher also complained that the actions involving the stock transfer
entitle  them to a judgment  that the stock may be freely  transferable  without
restriction  as well as money  damages  estimated  by them to be not  less  than
$583,600,  and  punitive  damages,  costs  and  attorney's  fees in  unspecified
amounts.  The Company  believes  that the action is without merit and intends to
vigorously defend against this action. The Company has been granted an extension
of time to respond to the complaint.

On August 10, 2002, Sieglinde Borchert, a former director of Sangui AG and Gluko
AG, filed a lawsuit  against the two German  Corporations  alleging  that she is
still  member of the  Board of  Management  of these  Companies.  The  Motion is
pending.  However,  the Company  believes  that the lawsuit has and will have no
material affect to the results and/or activities of the Company.


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

No matter was submitted to a vote of the Company's  security  holders during the
fourth quarter covered by this Report.

PART II
-------

ITEM 5. MARKET FOR SGBI'S SECURITIES

                                       17
<PAGE>


SGBI's common stock is presently  traded on the OTC Bulletin  Board  operated by
Nasdaq  under  the  symbol  SGBI as well as on the OTC  markets  of the  Berlin,
Frankfurt and Hamburg stock exchanges in Germany.

The  following  table sets forth the high and low  closing  prices for shares of
SGBI common  stock for the fiscal  periods  noted,  as reported by the  National
Daily Quotation  Service and the  Over-The-Counter  Bulletin  Board.  Quotations
reflect  inter-dealer prices,  without retail mark-up,  mark-down or commissions
and may not represent actual transactions.



                                                           CLOSING     PRICES
 YEAR              PERIOD                                   HIGH        LOW

  2002            First  quarter                            $0.59      $0.28
                  Second  quarter                           $0.43      $0.28
                  Third  quarter                            $0.38      $0.25
                  Fourth  quarter                           $0.65      $0.31

  2001            First  quarter                            $2.72      $1.75
                  Second  quarter                           $2.38      $1.11
                  Third  quarter                            $1.45      $0.94
                  Fourth  quarter                           $0.93      $0.48


In addition to freely tradeable shares, SGBI has numerous shares of common stock
outstanding  which 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.

At June 30, 2002, the number of record holders of the Company's common stock was
1,515.  The Company did not pay any cash dividends  during the past three fiscal
years and does not contemplate paying dividends in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

During the fiscal year ended June 30, 2002, the Company issued 141,000 shares of
common stock for consulting  services,  valued at $39,610,  based on the closing
price of the Company's common stock on the date of issuance. The issuance was an
isolated  transaction not involving a public offering  pursuant to Section (4) 2
of the Securities Act of 1933.


ITEM  6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Grants
------

The Company  receives grants from the German  government  which are used to fund
research and development  activities and the  acquisition of equipment.  Revenue

                                       18
<PAGE>

from grants for the  reimbursement  of research  and  development  expenses  are
offset against  research and development  expenses when the related expenses are
incurred. Grants related to the acquisition of tangible property are recorded as
a reduction of the property's historical cost.

The following discussion contains forward-looking statements that are subject to
business and economic risks and uncertainties,  and the Company's actual results
could differ  materially from these  forward-looking  statements.  The following
discussion  regarding the financial  statements of the Company should be read in
conjunction with the financial statements and notes thereto.

FISCAL 2002 COMPARED TO FISCAL 2001

RESULTS OF OPERATIONS

SBT
---
SALES.  Sales remained essentially flat, increasing 1% to approximately $572,000
in 2002 from approximately $567,000 in 2001.

COST OF SALES. Cost of sales decreased 8% to approximately $364,000 in 2002 from
approximately $395,000 in 2001. This decrease of $31,000 is primarily related to
additional  costs  incurred in 2001 for quality  control  purposes that were not
incurred in 2002.  As a result of the  decreased  cost of sales,  the  Company's
gross margin increased to 36% in 2002 from 30% in 2001.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 20% to
approximately  $806,000  in 2002  from  approximately  $670,000  in  2001.  This
increase of $136,000 relates mainly to increased legal expenses from lawsuits as
described in Item 3 (legal proceedings).

COMPENSATION  EXPENSE RELATED TO STOCK OPTIONS.  Compensation expense related to
stock  options  was  $1,000,000  in both 2002 and  2001,  which  represents  the
amortization  of the fair  value  of  stock  options  previously  issued  to the
chairman of the  Company.  Effective  June 30,  2002,  these stock  options were
cancelled and such expense will not be recognized in the future.

AMORTIZATION OF PREPAID CONSULTING FEES. Amortization of prepaid consulting fees
increased 49% to approximately  $661,000 from approximately $444,000 in 2001, or
an increase of $217,000.  At June 30, 2002,  management  determined that no more
benefit  will  be  received  in  relation  to the  prepaid  consulting  fee  and
accordingly wrote off the unamortized balance of approximately $221,000.

Sangui AG
---------
RESEARCH AND  DEVELOPMENT.  Research and development  expenses  decreased 18% to
approximately  $647,000  in 2002  from  approximately  $785,000  in  2001.  This
decrease of $138,000 is due to decreased research and development activities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 21% to
approximately  $682,000  in 2002  from  approximately  $562,000  in  2001.  This
increase of $120,000 is attributed to increases in operating expenses.

Gluko AG
--------
RESEARCH AND DEVELOPMENT.  Research and development  expenses  increased 295% to
approximately  $640,000  in 2002  from  approximately  $162,000  in  2001.  This
increase of $478,000 is due to increased research and development activities.

GENERAL AND ADMINISTRATIVE.  General and administrative  expenses increased 115%
to  approximately  $348,000 in 2002 from  approximately  $162,000 in 2001.  This
increase  of $186,000 is  attributed  to  increases  in staffing  and  operating
expenses.

Sangui Singapore
----------------
GENERAL AND ADIMISTRATIVE.  General and administrative  expenses increased 5% to
approximately  $192,000  in 2002  from  approximately  $183,000  in  2001.  This
increase of $9,000 relates to an increase in operating expenses.


SGBI
----
NET LOSS. The Company's net loss was  approximately  $4,798,000 or approximately
twelve cents per common share, in 2002, compared to approximately $3,628,000, or

                                       19
<PAGE>

nine cents per common  share,  in 2001.  This  increase  in net loss is a result
primarily  of  increased   research  and  development   expenses,   general  and
administrative expenses, and a decrease in investment income.

LIQUIDITY AND CAPITAL RESOURCES

At June 30,  2002 the  Company  had cash and  liquid  marketable  securities  of
approximately $3.4 million. The Company believes that its available cash will be
sufficient to satisfy its  requirements for at least the fiscal year ending June
30, 2003.  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.  Subsequent to June 30, 2002,  the Company sold the
assets  of  its  U.S.  based  operations   conducted  by  SBT  in  two  separate
transactions.  In the first  transaction,  the Company has received  $100,000 in
July,  2002 from the sales of its CDT business as  described  in last  paragraph
under the heading  Patent-Related  Litigation,  under NOTE 9 -  COMMITMENTS  AND
CONTINGENCIES.  The second  transaction  pertains to the sales of the  Company's
remaining  diagnostic business to another diagnostic company, for $60,000, to be
received in three equal annual payments beginning December 1, 2002.


ITEM 7. FINANCIAL STATEMENTS

CONTENTS

Independent Auditors' Report

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash  Flows

Notes to the Consolidated Financial Statements


                                       20
<PAGE>



                       SANGUI BIOTECH INTERNATIONAL, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                      FOR THE YEAR ENDED JUNE 30, 2002 WITH

                      INDEPENDENT AUDITORS' REPORT THEREON



INDEPENDENT AUDITORS' REPORT

To the Stockholders of
Sangui Biotech International, Inc.

We have audited the  accompanying  consolidated  balance sheet of Sangui BioTech
International,  Inc. and its  subsidiaries  (collectively,  the "Company") as of
June 30,  2002,  and the  related  consolidated  statements  of  operations  and
comprehensive loss,  stockholders'  equity, and cash flows for each of the years
in the two-year period then ended. These consolidated  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  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. and its subsidiaries as of June 30, 2002, and the results of
their  operations  and their  cash  flows for each of the years in the  two-year
period then ended in conformity with accounting principles generally accepted in
the United States of America.

CORBIN & WERTZ

Irvine, California, U.S.A.
August 30, 2002



                                       21
<PAGE>



                       SANGUI BIOTECH INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEET


                                     ASSETS
                                     ------


                                                                     June 30,
                                                                     -------
                                                                       2002
                                                                   ------------
Current assets
       Cash and cash equivalents.................................  $   832,130
       Available for sale securities.............................    2,559,197
       Accounts receivable.......................................       84,919
       Inventories...............................................       51,712
       Grant receivable..........................................      214,321
       Prepaid expenses and other assets.........................      334,372
                                                                   ------------
            Total current assets.................................    4,076,651

Property and equipment-net.......................................      510,064

Patents and licenses-net.........................................       45,315
                                                                   ------------
Total assets.....................................................  $ 4,632,030
                                                                   ============


             LIABILITIES AND STOCKHOLDERS' EQUITY
             ------------------------------------

Current liabilities
       Accounts payable and accrued expenses.....................  $   567,231
                                                                   ------------
Commitments and contingencies....................................           -

Stockholders' equity
       Preferred stock, no par value, 5,000,000 shares
       authorized,  no shares issued and outstanding.............           -
       Common stock,  no par value,  50,000,000 shares
       authorized, 40,655,363 shares issued and outstanding......   18,345,491
       Additional paid-in capital................................    2,000,000
       Accumulated other comprehensive income....................      162,942
       Accumulated deficit.......................................  (16,443,634)
                                                                   ------------

       Total stockholders' equity................................    4,064,799

Total liabilities and stockholders' equity.......................  $ 4,632,030
                                                                   ===========



See independent auditors' report and accompanying notes to consolidated
financial statements

                                       22
<PAGE>


                       SANGUI BIOTECH INTERNATIONAL, INC.
          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


                                                       Year ended June 30,
                                                  -------------   -------------
                                                      2002            2001
                                                  -------------   -------------

Sales..........................................   $    571,742    $    567,007

Cost of sales..................................        364,182         395,282
                                                  -------------   -------------

Gross profit...................................        207,560         171,725
                                                  -------------   -------------

Operating expenses
Research and development.......................      1,287,193         946,959
General and administrative.....................      2,028,355       1,577,315
Compensation expense related to stock options..      1,000,000       1,000,000
Depreciation and amortization..................        194,581         147,191
Amortization of prepaid consulting fees........        661,169         443,831
                                                  -------------   -------------

Total operating expenses.......................      5,171,298       4,115,296
                                                  -------------   -------------

Loss from operations...........................     (4,963,738)     (3,943,571)
                                                  -------------   -------------

Other income
Interest income, net of interest expense of
approximately $1,100 and $7,000, respectively..         70,940         276,824
Other income...................................         95,290          38,886
                                                  -------------   -------------
Total other income.............................        166,230         315,710
                                                  -------------   -------------

Net loss.......................................     (4,797,508)     (3,627,861)

Other comprehensive income (loss)
Foreign currency translation adjustments.......        468,218        (276,272)
Unrealized gain on marketable securities.......         51,094          30,716
                                                  -------------   -------------

Comprehensive loss.............................   $ (4,278,196)   $ (3,873,417)
                                                  =============   =============

Net loss available to common
shareholders per common share..................         ($0.12)         ($0.09)
                                                  =============   =============

Basic and diluted weighted average
number of common shares outstanding............     40,622,703      40,514,363
                                                  =============   =============


See independent auditors' report and accompanying notes to consolidated
financial statements

                                       23
<PAGE>

                       SANGUI BIOTECH INTERNATIONAL, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


<TABLE>
<CAPTION>


                                                       Preferred Stock          Common Stock             Additional
                                                --------------------------  --------------------------    Paid-in
                                                   Shares        Amount        Shares        Amount       Capital
                                                ------------  ------------  ------------  ------------  ------------
<S>                                             <C>          <C>            <C>          <C>           <C>

Balance at July 1, 2000........................     505,000   $     5,050    40,514,363   $18,525,831   $         -

Receipt of stock subscriptions.................           -             -             -             -             -

Write-off of stock subscriptions...............           -             -             -      (225,000)            -

Cancellation of preferred stock................    (505,000)       (5,050)            -         5,050             -

Compensation expense related to stock options..           -             -             -             -     1,000,000

Amortization of prepaid consulting fees........           -             -             -             -             -

Currency translation adjustments...............           -             -             -             -             -

Unrealized gain on marketable securities.......           -             -             -             -             -

Net loss.......................................           -             -             -             -             -
                                                --------------------------------------------------------------------

Balance at June 30, 2001.......................           -             -    40,514,363    18,305,881     1,000,000

Compensation expense related to stock options..           -             -             -             -     1,000,000

Amortization of prepaid consulting fees........           -             -             -             -             -

Issuance of common stock for consulting........           -             -       141,000        39,610             -

Currency translation adjustments...............           -             -             -             -             -

Unrealized gain on marketable securities.......           -             -             -             -             -

Net loss.......................................           -             -             -             -             -
                                                --------------------------------------------------------------------

Balance at June 30, 2002.......................           -   $         -    40,655,363   $18,345,491   $ 2,000,000
                                                ====================================================================

</TABLE>

See independent auditors' report and accompanying notes to consolidated
financial statements

                                       24
<PAGE>


<TABLE>
<CAPTION>


                                                                                   Accumulated
                                                                                      Other                         Total
                                                     Stock           Prepaid      Comprehensive  Accumulated     Stockholders'
                                                  Subscriptions  Consulting Fees  Income (Loss)    Deficit          Equity
                                                  -------------  ---------------  -------------  --------------  -------------
<S>                                              <C>            <C>              <C>            <C>             <C>

Balance at July 1, 2000........................      ($546,367)     ($1,105,000)     ($110,814)    ($8,018,265)   $ 8,750,435

Receipt of stock subscriptions.................        321,367                -              -               -        321,367

Write-off of stock subscriptions...............        225,000                -              -               -              -

Cancellation of preferred stock................              -                -              -               -              -

Compensation expense related to stock options..              -                -              -               -      1,000,000

Amortization of prepaid consulting fees........              -          443,831              -               -        443,831

Currency translation adjustments...............              -                -       (276,272)              -       (276,272)

Unrealized gain on marketable securities.......              -                -         30,716               -         30,716

Net loss.......................................              -                -              -      (3,627,861)    (3,627,861)
                                                  ----------------------------------------------------------------------------

Balance at June 30, 2001.......................              -         (661,169)      (356,370)    (11,646,126)     6,642,216

Compensation expense related to stock options..              -                -              -               -      1,000,000

Amortization of prepaid consulting fees........              -          661,169              -               -        661,169

Issuance of common stock for consulting........              -                -              -               -         39,610

Currency translation adjustments...............              -                -        468,218               -        468,218

Unrealized gain on marketable securities.......              -                -         51,094               -         51,094

Net loss.......................................              -                -              -      (4,797,508)    (4,797,508)
                                                  ----------------------------------------------------------------------------

Balance at June 30, 2002.......................   $          -   $            -   $    162,942    ($16,443,634)   $ 4,064,799
                                                  ============================================================================


See independent auditors' report and accompanying notes to consolidated
financial statements

</TABLE>

                                       25
<PAGE>

                       SANGUI BIOTECH INTERNATIONAL, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                       Year ended June 30,
                                                                                    ------------   ------------
                                                                                       2002           2001
                                                                                    ------------   ------------
<S>                                                                               <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss .......................................................................... $(4,797,508)   $(3,627,861)
Adjustments to reconcile net loss to net cash used in operating activities:
      Compensation expense related to stock options ...............................   1,000,000      1,000,000
      Depreciation and amortization ...............................................     194,581        147,191
      Amortization of prepaid consulting fees .....................................     661,169        443,831
      Realized gains on marketable securities .....................................     (61,000)             -
      Foreign exchange transaction gains ..........................................     (15,000)       (34,000)
      Estimated fair market value of common stock issued for services rendered ....      39,610              -
Changes in operating assets and liabilities:
      Accounts receivable .........................................................      44,009        (73,210)
      Grant receivable ............................................................    (208,138)       176,844
      Inventories .................................................................      18,309          9,669
      Prepaid expenses and other assets ...........................................      22,181       (147,226)
      Accounts payable and accrued expenses .......................................     278,614         58,412
                                                                                    ------------   ------------
Net cash used in operating activities .............................................  (2,823,173)    (2,046,350)
                                                                                    ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:

Increase in marketable securities .................................................  (4,846,151)    (4,394,972)
Purchase of property and equipment, patents and licenses ..........................    (198,905)      (234,626)
Maturities of marketable securities ...............................................   5,877,557        996,179

                                                                                    ------------   ------------
Net cash provided by (used in) investing activities ...............................     832,501     (3,633,419)
                                                                                    ------------   ------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Collection of stock subscription receivable .......................................           -        321,367
                                                                                    ------------   ------------

Effect of exchange rate changes ...................................................     468,218       (276,272)
                                                                                    ------------   ------------

Net decrease in cash and cash equivalents .........................................  (1,522,454)    (5,634,674)

Cash and cash equivalents, beginning of period ....................................   2,354,584      7,989,258
                                                                                    ------------   ------------

Cash and cash equivalents, ending of period ....................................... $   832,130    $ 2,354,584
                                                                                    ============   ============

Supplemental disclosures:
      Cash paid during the year for:
      Interest..................................................................... $     1,127    $     7,309
                                                                                    ============   ============
      Income taxes................................................................. $       800    $       800
                                                                                    ============   ============


See accompanying notes to accompanying consolidated financial statements
for more information on non-cash investing and financing activities
during the years ended June 30, 2002 and 2001.


See independent auditors' report and accompanying notes to consolidated
financial statements

</TABLE>


                                       26
<PAGE>


                       SANGUI BIO TECH INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED JUNE 30, 2002

NOTE  1  -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------------

Nature of Business
------------------

Sangui BioTech  International,  Inc.,  incorporated in Colorado in 1995, and its
subsidiaries  (collectively,   the  "Company")  are  engaged  in  the  research,
development, manufacture, and sales of medical products.

The Company's  wholly owned  subsidiary  Sangui  BioTech,  Inc.  ("Sangui USA"),
incorporated  in Delaware in 1996, is located in Santa Ana,  California.  Sangui
USA  manufactures in vitro  immunodiagnostic  blood test kits that are primarily
sold in the United States and Europe.  Subsequent to June 30, 2002,  the Company
agreed to sell its entire  Sangui USA  operation  (see Note 11). The Company has
three subsidiaries located outside the United States: Sangui-BioTech AG ("Sangui
AG"),  GlukoMediTech,  AG ("Gluko  AG"),  and Sangui  BioTech PTE Ltd.  ("Sangui
Singapore").

Sangui AG, incorporated in Mainz, Germany in 1995, is engaged in the development
of artificial  oxygen  carriers  (blood  substitute  and  additives).  Gluko AG,
incorporated in Mainz, Germany in 1996, is engaged in the development of glucose
implant  sensors.  Sangui  Singapore,  incorporated  in Singapore in 1999,  is a
regional  office for the  Company  and  carries  out  research  and  development
projects in conjunction with Sangui AG and Gluko AG.

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.  Certain amounts in fiscal 2001 have been reclassified to conform
to the fiscal 2002 presentation.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  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
receivable,  inventories,  and  long-lived  assets,  and valuation  allowance on
deferred tax assets.

Risks and Uncertainties
-----------------------

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

The Company's  management  believes,  based on its current  operating  plan, its
current cash and highly liquid marketable securities totaling approximately $3.4
million at June 30, 2002,  are  sufficient to fund the Company's  operations and
working capital requirements at least through June 30, 2003. The Company is also
considering various debt or equity funding opportunities.


Concentration of Risk
---------------------

Two customers  accounted for 38% of accounts  receivable as of June 30, 2002 and
approximately  40% of sales for the year ended June 30, 2002.  The two customers
accounted for 51% of sales for the year ended June 30, 2001.

                                       27
<PAGE>

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,  accounts receivable,  and accounts payable
and  accrued  expenses.  The  carrying  amount  of the  Company's  cash and cash
equivalents,   accounts  receivable,   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  German and Singapore  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 expense are translated at weighted average
exchange  rates for the period.  During  fiscal  2002 and 2001,  the Company had
foreign  exchange  transaction  gains included in other income of  approximately
$15,000 and $34,000, respectively.

Cash and Cash Equivalents
-------------------------

The Company maintains its cash in uninsured  accounts and not in bank depository
accounts  insured by the  Federal  Deposit  Insurance  Corporation  (FDIC).  The
Company has not  experienced any losses in these  uninsured  accounts.  Cash and
cash equivalents include time deposits for which the Company has no requirements
for compensating  balances.  The Company also maintains bank accounts in Germany
and Singapore.

Marketable Securities
---------------------

Marketable  securities  are  classified  as  available-for-sale,  as  defined by
Statement of Financial  Accounting  Standards ("SFAS") No. 115,  "Accounting for
Certain Investments in Debt and Equity Securities."  Unrealized gains and losses
are  excluded  from net loss and are  reported as a separate  component of other
comprehensive  income in  shareholders'  equity.  Realized  gains and losses are
included in other income and are determined based on the specific identification
of the securities bought and sold (see Note 2).

Inventories
-----------

Inventories,  which consist primarily of finished  immunodiagnostic products and
related  materials,  are  stated  at the  lower  of cost  or  market  with  cost
determined on a first-in, first-out (FIFO) basis. The Company regularly monitors
inventory for excess or obsolete items and makes any valuation  corrections when
such adjustments are needed.

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.  Depreciation expense for the years ended June 30, 2002 and
2001, was approximately  $177,000 and $138,000,  respectively.  Expenditures for
normal   maintenance  and  repairs  are  charged  to  income,   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, 2002 and 2001,
was approximately $17,000 and $9,000, respectively.

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, 2002, management of the Company believes

                                       28
<PAGE>

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
-------------------

Revenues from product sales are recognized at the time of shipment.

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.

Grants
------

The Company  receives grants from the German  government  which are used to fund
research and  development  activities and the acquisition of equipment (see Note
9).  Revenue  from  grants for the  reimbursement  of research  and  development
expenses are offset against  research and development  expenses when the related
expenses are incurred.  Grants related to the  acquisition of tangible  property
are recorded as a reduction of the property's historical cost.

Income Taxes
------------

The Company  accounts for deferred  income taxes using the  liability  method in
accordance with 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.  A  valuation  allowance  is
provided  for  significant  deferred  tax assets when it is more likely than not
that such assets will not be recovered.

Accounting for Stock-Based Compensation
---------------------------------------

The Company accounts for stock-based  compensation issued to employees using the
intrinsic  value based  method as  prescribed  by  Accounting  Principles  Board
Opinion No. 25,  "Accounting  for Stock  Issued to  Employees"  ("APB  25"),  as
amended. Under the intrinsic value based method,  compensation is the excess, if
any, of the fair value of the stock at the grant date or other  measurement date
over the amount an employee must pay to acquire the stock. Compensation, if any,
is recognized over the applicable  service period,  which is usually the vesting
period.  The Financial  Accounting  Standards Board ("FASB") has issued SFAS No.
123, "Accounting for Stock-Based Compensation." This standard, if fully adopted,
changes the method of accounting for all  stock-based  compensation  to the fair
value based method.  For stock  options and  warrants,  fair value is determined
using an option  pricing  model that takes into  account  the stock price at the
grant date, the exercise  price,  the expected life of the option or warrant and
the  annual  rate of  quarterly  dividends.  Compensation  expense,  if any,  is
recognized  over the  applicable  service  period,  which is usually the vesting
period.
The  adoption of the  accounting  methodology  of SFAS No. 123 for  employees is
optional  and the Company has elected to  continue  accounting  for  stock-based
compensation  issued to employees using APB 25; however,  pro forma disclosures,
as if the Company adopted the cost recognition  requirements under SFAS No. 123,
are required to be presented (see Note 5).

Basic and Diluted Earnings (Loss) Per Common Share
--------------------------------------------------

The Company computes net loss per common share using SFAS No. 128, "Earnings Per
Share." Basic earnings (loss) per common share is computed based on the weighted
average number of shares outstanding for the period. Diluted earnings (loss) per
share is computed by dividing net income (loss) by the weighted  average  shares
outstanding  assuming all dilutive  potential common shares were issued (at June
30, 2002, there were no potential common shares).

Comprehensive Income (Loss)
---------------------------

The Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes  standards for reporting and display of comprehensive  income (loss)
and its components in a full set of general-purpose financial statements.  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.   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.

                                       29
<PAGE>
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  shareholders.  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
(see Note 10).

New Accounting Pronouncements
-----------------------------

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal of Long-Lived Assets".  SFAS No. 144 addresses financial accounting and
reporting for the impairment of long-lived  assets and for long-lived  assets to
be disposed  of. The  provisions  of SFAS No. 144 are  effective  for  financial
statements  issued for fiscal years  beginning  after  December  15,  2001,  and
interim periods within these fiscal years, with early adoption  encouraged.  The
adoption  of SFAS  No.  144 did not  have a  material  impact  on the  Company's
financial statements.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB No. 4, 44, and
64,  Amendment of FASB Statement No. 13, and Technical  Corrections," to update,
clarify  and  simplify  existing  accounting  pronouncements.  SFAS No. 4, which
required all gains and losses from debt  extinguishment to be aggregated and, if
material,  classified as an extraordinary  item, net of related tax effect,  was
rescinded.  Consequently,  SFAS No. 64, which  amended SFAS No.4,  was rescinded
because it was no longer necessary.  The Company does not expect SFAS No. 145 to
have a material effect on its financial statements.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." SFAS 146 addresses  accounting and reporting
for costs  associated  with exit or disposal  activities and nullifies  Emerging
Issues Task Force Issue No. 94-3,  "Liability  Recognition for Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (Including  Certain
Costs Incurred in a Restructuring)."  SFAS No. 146 requires that a liability for
a cost associated  with an exit or disposal  activity be recognized and measured
initially  at fair  value  when the  liability  is  incurred.  SFAS  No.  146 is
effective for exit or disposal  activities that are initiated after December 31,
2002, with early  application  encouraged.  The adoption of SFAS No. 146 did not
have a material effect on its financial statements.

NOTE 2 - AVAILABLE FOR SALE  SECURITIES
---------------------------------------

Available for sale securities consist of the following at June 30, 2002:

                                         Cost     Fair Market Value  Unrealized
                                                                          Gain

Mutual Funds......................... $1,525,414      $1,568,117        $42,703
Corporate bonds due within one year..    991,080         991,080            -
                                      -----------    ------------  -------------
                                      $2,516,494      $2,559,197        $42,703
                                      ===========    ============  =============

NOTE  3  -  PROPERTY  AND  EQUIPMENT
------------------------------------

Property and equipment consists of the following at June 30, 2002:


    Technical and laboratory equipment...............   $845,767
    Leasehold improvements...........................    216,416
    Office equipment.................................     41,334
                                                     -----------
                                                       1,103,517

      Less accumulated depreciation and amortization    (593,453)
                                                     -----------
                                                        $510,064
                                                     ===========

                                       30
<PAGE>


NOTE  4  -  PATENTS AND LICENSES
--------------------------------

At June 30,  2002,  patents  and  licenses  totaled  $107,334  less  accumulated
amortization of $62,019.


NOTE  5  -  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.

In 1999, the Company issued 2,600,000 shares of its common stock to a consultant
in  exchange  for a public  relations/promotions  contract  covering  the period
January 1999 to December  2002, as amended in August 2000. The fair value of the
services,  $3,145,000, was being amortized ratably over the contract period. For
the year ended June 30, 2001, the Company recognized  approximately  $444,000 of
amortization  expense.  For the year ended June 30, 2002, the Company  initially
recognized $440,000 of amortization  expense,  leaving an unamortized balance of
the prepaid asset of $221,169.  At June 30, 2002,  management determined that no
more  benefit  will be received in  relation to the prepaid  consulting  fee and
accordingly  wrote off the  remaining  balance of  $221,169 to  amortization  of
prepaid consulting fees expenses.

During fiscal 2000, the Company  entered into a subscription  with  Euro-America
GmbH  valued  at  $7,712,000,  of which the  Company  received  $7,487,000.  The
balance,  $225,000, was recorded as stock subscription receivable as of June 30,
2000. On June 30, 2001, the Company's Board of Directors authorized - because of
the  deficiency  in  collection  - the  writing  off of the  $225,000  of  stock
subscription  receivable  which the Company  recorded  as a reduction  of common
stock in the accompanying statements of stockholders' equity.

During fiscal 2002, the Company issued 141,000 shares of restricted common stock
valued at $39,610 as payment for consulting services.

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.  During the year ended June 30, 2001, the Company  cancelled
all 505,000 shares of its preferred stock that had been issued.

Stock Options
-------------

From time to time,  the  Company  may issue  stock  options  pursuant to various
agreements and other contemporary agreements.

In November 1999, pursuant to an agreement with its chairman, the Company issued
the chairman options to purchase 3,000,000 shares of common stock at an exercise
price of  $0.01  valued  at  $10,845,000  (under  APB 25).  The  options  can be
exercised at the time the Company  completes the  development  of the artificial
oxygen carrier or the implantable sensor and receives  regulatory  approval from
either Germany,  the United States, or Singapore.  The Company is amortizing the
option value to compensation expense over the remaining estimated vesting period
of the options since the Company is in the process of developing  the artificial
oxygen carrier and implantable sensor. The options were exercisable through June
30, 2009. As a result, the Company recognized compensation expense of $1,000,000
in fiscal 2002 and 2001,  respectively,  related to the vesting of the  options.
Effective  June 30, 2002,  these options were  cancelled by mutual  agreement of
both parties.  No further  compensation  expense will be recorded as a result of
the cancellation.

                                       31
<PAGE>


 Option activity for the years indicated below is as follows:

                                                 Options             Weighted
                                                                  Average Price
   Outstanding, June 30, 2001 and 2000.........    3,000,000              $0.01
        Granted................................            -                  -
        Exercised..............................            -                  -
        Cancelled/Forfeited....................   (3,000,000)             (0.01)
                                                 -------------    --------------
   Outstanding, June 30, 2002                              -                  -
                                                 =============    ==============

   Exercisable, June 30,2002                                -                  -


SFAS  123  Pro  Forma  Information
----------------------------------

The  Company has adopted the  disclosure-only  provisions  of SFAS No. 123.  Pro
forma  information  regarding net income (loss) is required by SFAS No. 123, and
has been  determined as if the Company had accounted  for its  employee's  stock
options  under the fair value  method of SFAS No. 123.  The fair value for these
options  was  estimated  at the date of grant  using  the Black  Scholes  option
pricing model with the following  assumptions  for the year ended June 30, 2000:
risk free interest rate of 6.0%;  expected dividend yield of 0% (for all years);
volatility factor of 62.5%; and an expected term of three years.

For purpose of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the option vesting  period.  Adjustments  are made for
options forfeited prior to vesting.  The effect on compensation  expense and net
loss had  compensation  cost  for the  Company's  stock  option  issuances  been
determined  based  on fair  value  on the  date of  grant  consistent  with  the
provisions of SFAS No. 123 is as follows for the years ended June 30:

                                                   2002              2001
          Net loss
               As reported..................   $(4,797,508)      $(3,627,861)
               Pro forma....................   $(4,797,508)      $(3,627,861)

          Net loss per share:
               As reported..................      $  (0.12)         $  (0.09)
               Pro forma....................      $  (0.12)         $  (0.09)


NOTE 6  -  INCOME  TAX  PROVISION
---------------------------------

No current provision for income taxes for the years ended June 30, 2002 and 2001
is required,  since the Company  incurred net operating  losses through June 30,
2002.

Income tax expense for the years ended June 30, 2002 and 2001  differed from the
amounts  computed by applying the U.S. federal income tax rate of 34 percent for
the following reasons:

                                              2002             2001
                                        --------------    --------------

Income tax benefit at U.S. federal
        statutory rates...............  $  (1,631,000)    $  (1,233,000)
Net operating losses not benefited....      1,631,800         1,233,800
State and local income taxes, net
        of federal income tax effect..           (800)             (800)
                                        --------------    --------------
                                        $           -     $           -
                                        ==============    ==============

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets at June 30, 2002 are presented below:

          Deferred  tax  assets:
          Net  operating  losses.....................     $   4,375,000
          Less  valuation  allowance.................     $  (4,375,000)
                                                          --------------
          Net  deferred  tax  assets.................     $           -
                                                          ==============

                                       32
<PAGE>

As of June 30,  2002,  the  Company  had net  operating  loss  carryforwards  of
approximately  $4,560,000,  $4,208,000 and $6,116,000 available to offset future
taxable federal, state, and foreign income, respectively.  The federal and state
carryforward  amounts  expire in  varying  amounts  between  2002 and 2012.  The
foreign net operating loss carryforwards do not have an expiration period.

NOTE 7  -  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, 2002 and 2001:

                                                  2002            2001
                                             --------------  --------------
Numerator for basic and diluted loss
     per common share -  net loss            $  (4,797,508)  $  (3,627,861)
                                             ==============  ==============

Denominator for basic and diluted loss
     per common share - weighted average
     shares                                     40,622,703      40,514,363
                                             ==============  ==============


Basic and diluted loss per common share      $       (0.12)  $       (0.09)
                                             ==============  ==============

NOTE 8 - RELATED PARTY TRANSACTIONS
-----------------------------------

As described  in Note 5, the Company  wrote-off  $225,000 of stock  subscription
receivable due from Euro-American GmbH.

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 2002 and 2001.

Effective June 30, 2002,  options to purchase  3,000,000  shares of common stock
which were issued to the  chairman of the Company in fiscal 2000 were  cancelled
(see Note 5).


NOTE 9  -  COMMITMENTS  AND  CONTINGENCIES
------------------------------------------

Operating  Leases
-----------------

The Company  leases its office and  laboratory  facilities in the United States,
Germany,  and  Singapore  under three  operating  leases  which  expire  through
December 2003, respectively.

Future minimum lease payments under these leases at June 30, 2002 are:

Years Ending
June 30,
--------
2003..........................  $178,000
2004..........................    45,000
                              -----------
                                $223,000
                              ===========

Rent  expense was  approximately  $210,000  for each of the years ended June 30,
2002 and 2001.

Grants
------

In 1998 and 1999, Sangui AG and Gluko AG, respectively, received grants from the
government  of  the  German  state  of  Northrhine-Westphalia  supporting  their
respective  development  projects.  These  grants are  designed  to cover 40% of
eligible research and development costs and capital  expenditures subject to the
Company's ability to cover the remaining 60% of the costs. The grants originally
totalled approximately $1.8 million and $2.2 million for Sangui AG and Gluko AG,
respectively.  An  additional  condition  of the grant is that if the product is
developed   before   2003,   it  must  be  produced  in  the  German   state  of
Northrhine-Westphalia.

                                       33
<PAGE>

Based on research and development  expenditures and capital expenditures through
June 30,  2000,  the  Company had  recorded  for  approximately  $818,000 of the
grants. In fiscal 2001, the Company recorded  approximately $348,000 and $76,000
of research and development expenditures and capital expenditures, respectively.
In fiscal  2002,  the Company  recorded  approximately  $379,000  and $62,000 of
research and development  expenditures and capital  expenditures,  respectively.
The grants are recorded as a reduction of research and development  costs and as
a reduction of the historical cost of certain property and equipment.

Patent-Related Litigation
-------------------------

In December  2000,  Axis/Shields  ASA, a Norway  corporation  ("Axis"),  filed a
lawsuit  against  Sangui USA alleging  that Sangui USA's  Carbohydrate-Deficient
Transferrin  ("CDT") test kit,  which is used to detect  chronic  alcohol abuse,
constituted  an  infringement  of patent  rights owned by Axis. In March 2001, a
settlement  was reached and Sangui USA agreed to cease  manufacture  and sale of
the CDT test kit.  Sangui USA  subsequently  designed a new test kit which it is
currently  manufacturing  and selling.  Sangui USA designed its current  product
specifically to avoid  infringement  of the Axis patent.  In December 2001, Axis
filed another  lawsuit in the U.S.  District  Court for the Central  District of
California  against  Sangui USA alleging that the new test kit also infringed on
Axis' patent  rights.  Sangui USA filed an answer denying the claims of Axis and
has counterclaimed  against Axis for a declaratory judgment of invalidity of the
patent of Axis and for antitrust violations.  On July 24, 2002, an agreement was
entered into between Axis and the Company,  where the Company agreed to cease to
sell CDT kits and provided  other  intangible  information in  consideration  of
$100,000  paid by Axis to the  Company.  As a result  of this  settlement,  Axis
caused a  dismissal  with  prejudice  of all its claims to be filed in the legal
action.  Concurrently,  the Company  caused a dismissal  with  prejudice  of the
Company's counterclaim to be filed in the legal action.

Other Litigation
----------------

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


NOTE 10 - BUSINESS SEGMENTS
---------------------------

The Company reports it business segments based on geographic regions, which are
as follows as of June 30, 2002 and for the years ended June 30, 2002 and 2001:


                                           2002            2001
                                      ------------    ------------
Net sales:
Sangui USA.........................   $   571,742     $   567,007
Sangui BioTech AG..................       -               -
GlukoMediTech AG...................       -               -
Sangui BioTech PTE Ltd.............       -               -
                                      ------------    ------------
                                      $   571,742     $   567,007
                                      ============    ============


Net loss:
Sangui USA.........................   $ 2,256,071     $ 1,895,170
Sangui BioTech AG..................     1,365,525       1,102,167
GlukoMediTech AG...................       955,756         447,456
Sangui BioTech PTE Ltd.............       220,156         183,068
                                      ------------    ------------
                                      $ 4,797,508     $ 3,627,861
                                      ============    ============

                                       34
<PAGE>

Depreciation and amortization
Sangui USA.........................   $    13,981     $    14,570
Sangui BioTech AG..................       107,070          98,031
GlukoMediTech AG...................        41,192          34,590
Sangui BioTech PTE Ltd.............        32,338          -
                                      ------------    ------------
                                      $   194,581     $   147,191
                                      ============    ============

Identifiable assets
Sangui USA.........................   $   705,414
Sangui BioTech AG..................     1,517,076
GlukoMediTech AG...................     2,261,128
Sangui BioTech PTE Ltd.............       148,412
                                      ------------
                                      $ 4,632,030
                                      ============

NOTE 11  -  SUBSEQUENT EVENT
----------------------------

On September 15, 2002, the Company sold  essentially all the remaining assets of
Sangui USA to  Biomerica,  Inc.,  a  Delaware  company  operating  in the Orange
County,  California,  for $60,000, to be received in three equal annual payments
beginning December 1, 2002.


NOTE 12 - PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)
---------------------------------------------------------------

The pro forma information  contained in this schedule is based on the historical
financial statements of the Company and should be read in conjunction with these
statements and related notes thereto.  The purpose of presenting  this unaudited
pro forma  financial  data is to show the  effects on the  historical  financial
information had the Company agreed to cease to sell CDT kits and sell the assets
of Sangui USA  (collectively,  the "Sangui USA Operations") at June 30, 2002 for
the proforma  balance  sheet and at July 1, 2001 for the  proforma  statement of
operations.  However,  the pro froma  condensed  balance sheet and the pro forma
condensed statement of operations are not necessarily  indicative of the effects
on the  financial  position  and  results  of  operations  what  would have been
attained  had the  cessation  of the Sangui  USA  Operations  actually  occurred
earlier.


                        PRO FORMA CONDENSED BALANCE SHEET
                                  JUNE 30, 2002
                            (IN THOUSANDS OF DOLLARS)
                                  (See Note a)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                        Pro Forma
                                                                                      excluding the
                                                             Pro Forma        See       Sangui USA
                                              Historical     Adjustments     Notes      Operations
                                             -------------  --------------   -----    --------------
<S>                                         <C>            <C>              <C>      <C>

Cash and cash equivalents.....................       $832            $60       b               $827
                                                                     (65)      c
Available for sale securities.................      2,559               -                     2,559
Accounts receivable and  inventories..........        137           (137)      d                  -
Grant receivable, prepaid expenses and
   other assets...............................        549               -                       549
                                             -------------  --------------            --------------
Total current assets..........................      4,077           (142)                     3,935

Property and equipment-net....................        510             (6)      d                504
Patents-net...................................         45               -                        45
                                             -------------  --------------            --------------

Total assets..................................     $4,632          $(148)                    $4,484
                                             =============  ==============            ==============

</TABLE>

                                       35
<PAGE>

<TABLE>
<CAPTION>

                                                  LIABILITIES & STOCKHOLDERS' EQUITY
<S>                                          <C>          <C>                <C>    <C>


Accounts payable and accrued expenses.........       $567             (65)     c               $502
Common stock..................................     18,509               -                    18,509
Additional paid-in capital....................      2,000               -                     2,000
Accumulated deficit...........................    (16,444)             60                   (16,527)
                                                                     (143)
                                             -------------  --------------            --------------

                                                   $4,632           $(148)                   $4,484

                                             =============  ==============            ==============
</TABLE>


Notes to pro forma adjustments:

a)       These pro forma  adjustments have been computed  assuming the cessation
         of  sales  of CDT  kits  and  the  sale  of  Sangui  USA's  assets  was
         consummated at June 30, 2002. These amounts will differ from the actual
         results primarily due to the timing of the actual transaction.

To record the following:

           b)   Sales price of assets...............................  $60

           c)   Payment of liabilities of from sales proceeds.......   65

           d)   Cost of assets sold.................................  143


                   PRO FORMA CONDENSED STATEMENT OF OPERATIONS
                        FOR THE YEAR ENDED JUNE 30, 2002
                            (IN THOUSANDS OF DOLLARS)
                                  (See Note a)
<TABLE>
<CAPTION>

                                                                                 Pro Forma
                                                                                excluding the
                                                           Pro Forma    See      Sangui USA
                                               Historical  Adjustments  Notes    Operations
                                               ----------  -----------  -----   -------------
<S>                                          <C>          <C>          <C>     <C>


Sales                                          $      572        (572)    b     $          -

Cost of sales                                         364        (364)    b                -
                                               ----------  -----------  -----   -------------
Gross profit                                          208        (208)                     -

Operating expenses:
Research and development                            1,287           -                  1,287
General and administrative                          2,028        (274)    b            1,754
Compensation expense related to stock
   options                                          1,000           -                  1,000
Depreciation and amortization                         195           -                    195
Amortization of prepaid consulting fee                661           -                    661
                                               ----------  -----------  -----   -------------
                                                    5,171        (274)                 4,897

Loss from operations                               (4,963)        (66)                (4,897)

Other income                                          166           -                    166
                                               ----------  -----------  -----   -------------

Net loss                                       $   (4,797) $      (66)          $     (4,731)
                                               ==========  ===========  =====   =============

</TABLE>

                                       36
<PAGE>

Notes to pro forma adjustments:

a)       These pro forma  adjustments have been computed  assuming the cessation
         of  sales  of  CDT-kits  and  the  sale  of  Sangui  USA's  assets  was
         consummated at June 30, 2001. These amounts will differ from the actual
         results primarily due to the timing of the actual transaction. However,
         the pro forma statement only discloses  income or losses from recurring
         operations  and does  not  reflect  any  gain or loss  from the sale of
         Sangui USA's assets.  The pro forma  adjustments  give effect to events
         that are  directly  attributable  to the sale  and  expected  to have a
         continuing impact on the Company.

To record the following:

b)       Eliminate income and loss items directly identified with Sangui USA's
         Operations.

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

None


PART III
--------

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS

The following  table sets forth the names and ages of the current  directors and
executive officers of Sangui BioTech International, Inc. (SGBI), 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 are as follows:

<TABLE>
<S>                       <C>           <C>                      <C>            <C>



NAME                       AGE                 ADDRESS             RESIDENCE          CURRENT POSITION
Prof. Wolfgang Barnikol,    68            Arndtstrasse 8, D-58453   Germany        Chairman, President,
M.D., Ph. D.                              Witten, Germany                          Chief Executive Officer,
                                                                                   Executive Director

Oswald Burkhard,            51            Martinsgasse 1, D-67547   Germany        Non-Executive Director
M.D., Ph. D.                              Worms, Germany

Dr. Edgar Fritschi, Ph.D.   60            Rispenweg 9, D-50933      Germany        Non-Executive Director
                                          Koeln


Dora Malek                  45            Saturnstr. 19,  D-85609   Germany        Non-Executive Director
                                          Aschheim, Germany

Professor Joachim Lutz,     70            Thueringerstr. 24 D-97078 Germany        Non-Executive Director
M.D., Ph.D.                               Wuerzberg, Germany


</TABLE>

                                       37
<PAGE>


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 the Company.

The  day-to-day  operations of SGBI are entrusted to the Executive  Directors of
the Company who are  assisted by a  management  team of key  executive  officers
(Executive Officers).  The particulars of the Executive Officers as per June 30,
2002 are set out below:


<TABLE>
<S>                       <C>            <C>                        <C>             <C>

NAME                       AGE                 ADDRESS                RESIDENCE         CURRENT POSITION

Prof. Wolfgang Barnikol,    68            Arndtstrasse 8, D-58453      Germany       President and Chief
M.D., Ph. D.                              Witten, Germany                            Executive Officer

Oswald Burkhard,            52            Martinsgasse 1, D-67547      Germany       Vice President
M.D., Ph. D.                              Worms, Germany


Patrick  Onishi             48            2 Cambridge                  US            Secretary
                                          Irvine  CA  92620


</TABLE>


The business and working  experience of the Directors and key Executive Officers
of the Company are set out below:

PROFESSOR WOLFGANG K. R. BARNIKOL,  M.D., Ph.D.,  Chairman,  President and Chief
Executive Officer, and Executive Director of the Company, 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  haemoglobins.  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.

OSWALD BURKHARD,  M.D., PH.D., Vice President and Non-Executive  Director of the
Company,  has more than 16 years of clinical  experience  in the  diagnosis  and
treatment of hematological  and oncological  diseases.  Since 1989, Dr. Burkhard
has  operated  his  own  facilities  in  Worms,  Germany,  which  specialize  in
hematology  and  oncology.  His  practice  offers  patients all  diagnostic  and
therapeutic  possibilities,  necessary for internal oncology. From 1982 to 1989,
Mr. Burkhard was trained in hematology and oncology at the University  School of
Medicine at Mainz, Mainz,  Germany.  During this time, he cared almost daily for
patients  with  hematological  or  oncological  problems.  Additionally,  he was
trained in transfusion medicine. He became a specialist in internal medicine and
hematology. He has significant experience in clinical trials. From 1975 to 1989,
he worked at the Institute for  Physiology  at the  University of Mainz,  Mainz,
Germany where he was involved in the physical chemistry of haemoglobin solutions
and the  measurement of oxygen by fluorescence  quenching.  In 1988, he obtained
the Doctorate in Medicine from University of Mainz, Mainz, Germany. Dr. Burkhard
received  several  patents for his  scientific  work.  In 1989,  he obtained the
Tancre  award of the  University  of Mainz,  Mainz,  Germany.  Dr.  Burkhard has
studied  chemistry,  physics and  medicine at the  University  of Mainz,  Mainz,
Germany.  He received a diploma in Chemistry in 1973 from  University  of Mainz,
Mainz,  Germany.  In 1976, he obtained the Doctorate in Physical  Chemistry from
University of Mainz, Mainz, Germany. During his thesis, Dr. Burkhard synthesized
approximately 20 new compounds.


                                       38
<PAGE>

EDGAR  FRITSCHI,  M.D.,  studied  Veterinary  Medicine  at the  Universities  of
Gie(beta)en and Zurich gaining his Doctorate in Hannover.  He had specialised in
the fields of  toxicology,  pharmacology,  and in the  development  of new human
therapeutics in particular.  Since 1969, Dr Fritschi has held leading  positions
in the research and development  departments of renowned  German  pharmaceutical
companies,  including Godecke AG in Freiburg, L. Heumann & Co. in Nuremberg, and
Schwarz  Pharma  AG in  Monheim.  Dr  Fritschi  is a Board  Member  of the North
Rhine-Westphalia Venture Capital Forum and since 1999 has been Managing Director
of TecTo Market GmbH,  Cologne,  specializing in offering consulting services to
biotechnology companies.

DORA MALEK, Attorney-at-Law,  Non-Executive Director, employed since 1990 in the
finance  department of an international  insurance  company in the area of group
investments,  and since 1994 as an independent attorney  specializing in banking
and stock exchange law,  capital  investment law and the law of partnerships and
corporations.  She will aid the company not only in all legal matters,  but also
in the development of financial and investment concepts.

PROFESSOR JOACHIM LUTZ, M.D., Non-Executive Director,  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 W rzburg  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.

PATRICK ONISHI, Secretary, joined SanguiBioTech, Inc. in 1997 and is responsible
for  manufacturing,  purchasing,  packaging  and  shipping.  He held various key
technical management positions for 14 years at the Nichols Institute Diagnostics
(now Quest Diagnostics, Inc.) such as Director of Manufacturing,  and Manager of
Technical  Manufacturing.  He  worked  as  a  laboratory  technician  after  his
graduation at San Diego State University in Biology.

Section 16(a) of the U.S.  Securities Exchange Act of 1934 requires the officers
and  directors of the Company and those persons who  beneficially  own more than
10% of the  outstanding  stock of the  Company  to file  reports  of  securities
ownership and charges in such ownership with the SEC. Based solely upon a review
of copies of the reports filed,  the Company believes that during the year ended
June 30, 2002,  the filing  requirements  were complied with by its officers and
directors,  except that a former director of the Company, Mr. Helmut Kappes, did
not comply with such reporting requirements.

                                       39
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary Compensation Table

The  following  SGBI  summary  compensation  table  shows  certain  compensation
information  for services  rendered in all  capacities  for the two fiscal years
ended June 30, 2002 and 2001. No executive  officer's  salary and bonus exceeded
$100,000 in any of the applicable years. The following  information includes the
dollar value of base salaries, bonus awards, the number of stock options granted
and certain other compensation, if any, whether paid or deferred.

<TABLE>
<CAPTION>

                          SUMMARY COMPENSATION TABLE

                             Annual Compensation                        Long Term Compensation
                             -------------------                        -----------------------
                                                                     Awards                     Payouts
                                                                     ------                     -------
<S>                  <C>         <C>     <C>      <C>           <C>             <C>            <C>     <C>

                                                                  Restricted      Securities
                                                   Other Annual     Stock         Underlying    LTIP     All Other
Name and                          Salary  Bonus    Compensation     Awards         Options     Payouts Compensation
Principal Position     Year        ($)(2)  ($)        ($)            ($)           SARs (#)     ($)        ($)
------------------    ------     -------  -----   -------------   ----------      ----------   ------  ------------

Wolfgang Barnikol      2002       115,884  -0-        -0-            -0-            -0-         -0-         -0-
Chairman, CEO
and President (1)      2001       105,922  -0-        -0-            -0-            -0-         -0-         -0-
                       2000       111,681  -0-        -0-            -0-            3,000,000   -0-         -0-

Oswald Burkhard        2002       -0-      -0-        -0-            -0-            -0-         -0-         -0-
Vice President         2001       4,775    -0-        -0-            -0-            -0-         -0-         -0-
                       2000       5,836    -0-        -0-            -0-            -0-         -0-         -0-


Seiglinde Borchert     2002       40,853   -0-        -0-            -0-            -0-         -0-         -0-
COO                    2001       54,697   -0-        -0-            -0-            -0-         -0-         -0-
                       2000       57,274   -0-        -0-            -0-            -0-         -0-         -0-

Detlev Frhr. von       2002       76,017   -0-        -0-            -0-            -0-         -0-         -0-
Linsingen              2001        6,512   -0-        -0-            -0-            -0-         -0-         -0-
CFO, Treasurer         2000       82,200   -0-        -0-            -0-            -0-         -0-         -0-

Harald Poetzschke      2002       46,972   -0-        -0-            -0-            -0-         -0-         -0-
CSO                    2001       36,465   -0-        -0-            -0-            -0-         -0-         -0-
                       2000       40,858   -0-        -0-            -0-            -0-         -0-         -0-

Patrick Onishi         2002       70,000   -0-        -0-            -0-            -0-         -0-         -0-
Secretary              2001       70,000   -0-        -0-            -0-            -0-         -0-         -0-
                       2000       70,000   -0-        -0-            -0-            -0-         -0-         -0-

</TABLE>

(1) These  options  were  cancelled  as of June 30,  2002.  (2) 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.

Compensation of Directors

To date, Directors of the Company have not received any compensation for serving
in such capacity.

Employment Agreements

The Company and its  subsidiaries  have  employment  agreements with each of its
officers or key employees.  Professor Barnikol has an agreement with the Company
pursuant to which he is entitled to 3% royalties of gross  revenues  earned with
any product based on his inventions.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership of the common stock of SGBI as of the date of this report by:

* each  person or entity  known to own  beneficially  more than 5% of the common
stock;
* each of SGBI's  directors;

                                       40
<PAGE>

* each of SGBI's named executive  officers;
and * all executive officers and directors of SGBI as a group.

<TABLE>
<S>                            <C>                                      <C>                   <C>


                                 Name and Address of                      Amount and Nature of  Percent of
Title of Class                   Beneficial Owner                         Beneficial Ownership  Class
------------------              ----------------------                    --------------------  -----------

Common Stock                     Dr. Wolfgang Barnikol                              1,853,600(1)4.56%
                                 Arndtsr, 8, D-58453 Witten
                                 Germany


Common Stock                     Dr. Oswald Burkhard                                  794,400   1.95%
                                 Martinsgasse 1, D-67547 Worms
                                 Germany

Common Sock                      Dr. Edgar Fritschi                                       -0-     *
                                 Rispenweg 9
                                 D-50544 Koeln
                                 Germany

Common Stock                     Dora Malek                                               200     *
                                 Saturnstr. 19
                                 D-85609  Aschheim
                                 Germany

Common Stock                     Professor Joachim Lutz                                   -0-     *
                                 Thueringerstr. 24 D-97078 Wuerzburg
                                 Germany

Common Stock                     Patrick Onishi                                       70,000    0.17%
                                 2 Cambridge
                                 Irvine  CA  92620,  US

Common Stock                     All Officers and Directors as
                                 a Group (8 persons)                                2,718,200   6.69%
                                                                                    =========  ======

</TABLE>

(1) Excludes 3,000,000 options to purchase common stock of the Company that were
cancelled as of June 30, 2002.
*Less than 0.1%


ITEM 12. CERTAIN TRANSACTIONS

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

EURO-AMERICAN.  Euro-American  GmbH (EA) was a  financial  services  corporation
organized  and  established  in Germany.  Axel  Kutscher,  former  Non-Executive
Director of the Company, and Helmut Kappes, former Non-Executive Director of the
Company,  and substantial  shareholders  of the Company,  are also directors and
shareholders  of EA. During 2000, the Company  entered into a subscription  with
EA, a principal stockholder of the Company,  valued at $7,712,000,  of which the
Company  received  $7,487,000.  The  balance,  $225,000,  was  recorded as stock
subscription  receivable.  On June 30, 2001,  the  Company's  Board of Directors
authorized the writing off of the $225,000 of stock subscription receivable.

STOCK  OPTIONS  GRANTED IN FAVOR OF  PROFESSOR  WOLFGANG  BARNIKOL.  The Company
entered into a stock option  agreement  which took effect on September 24, 1999,
with  Professor  Wolfgang  Barnikol,  Chairman,  Chief  Operating  Officer,  and
Executive  Director and a  substantial  shareholder  of the  Company.  Professor
Barnikol was granted a share option of 3 million  Shares at an exercise price of
US$0.01 per share,  in  consideration  of the assignment of his patent rights to
the Company.  Professor Barnikol is entitled to exercise the option at the point
the Company  completes the  development of the artificial  oxygen carrier or the
implantable  sensor  and  receives  regulatory  approval  from  either  Germany,
Singapore  or the United  States.  The option  shall  terminate  and cease to be
exercisable on June 30, 2009 unless  terminated  earlier in accordance  with the
stock option agreement. The stock option agreement is governed under the laws of
the State of California.  As of June 30, 2002 Prof.  Barnikol  waived his rights
concerning the option and the option was cancelled.

ROYALTY  ARRANGEMENT  WITH  PROFESSOR  WOLFGANG  BARNIKOL.  On July 7, 1997, the
Company  entered into an agreement  with  Professor  Barnikol  pursuant to which

                                       41
<PAGE>

Professor Barnikol assigned certain patents to the Company's German subsidiaries
in  exchange  for  a 3%  royalty  on  products  on  net  revenues  developed  by
SanguiBioTech  AG or  GlukoMeditech  AG. The royalty expires in 20 years or upon
expiration of the patents.

ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K

(a) Index to Exhibits

Exhibit No.

2.1 (1) Exchange Agreement between MRC Legal Services LLC and SanguiBioTech
International, Inc., dated of March 31, 2000 (1)

3.1 (1) Articles of Incorporation of the Company (1)

3.2 (1) Bylaws of the Company(1)

3.3 Articles of Association of GlukoMeditech Aktiengesellschaft (2)

3.4 Articles of Association of SanguiBiotech Aktiengesellschaft (2)

3.5 Memorandum and Articles of Association of Sangui Biotech Singapore
Pte. Ltd. (3)

4.1 Stock Option  Agreement  between  Professor  Wolfgang  Barnikol and Sangui
Biotech  International,  Inc. dated October 12, 2000 (2)(cancelled as of
June 30, 2002).

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)

21.1 Subsidiaries of the Company (2)

(1) Filed as an  Exhibit  to the  Report on Form 8-K filed on or about
April 4, 2000 and incorporated herein by reference.

(2) Filed as an Exhibit to the  original  Report on Form 10-KSB filed on
October 13, 2000.

                                       42
<PAGE>

(3) Filed as an Exhibit to the amended  Report on Form 10-KSB  filed on
November 20, 2000.

(4) Filed as an Exhibit  to the Report on Form  10-KSB  filed on
September  28, 2001.

(b) Reports on Form 8-K

None

SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant 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/ Wolfgang Barnikol
                               ----------------------------------
                               Wolfgang  Barnikol
                               President  and  Director


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


       Signatures                         Title                     Date
       ----------                         -----                     ----

                                                              September 27, 2002
/s/ Wolfgang Barnikol           President, Chief Executive
----------------------          Officer and Director
Wolfgang Barnikol, M.D.,
Ph.D
                                                              September 27, 2002
/s/ Patrick Onishi              Secretary
----------------------
Patrick Onishi
                                                              September 27, 2002
/s/ Oswald Berkhard             Director
----------------------
Oswald Berkhard, M.D., Ph.D
                                                              September 27, 2002
/s/ Dora Malek                  Director
----------------------
Dora Malek
                                                              September 27, 2002
/s/ Joachim Ludz                Director
----------------------
Joachim Ludz, M.D.
                                                              September 27, 2002
/s/ Edgar Fritschi              Director
----------------------
Edgar Fritschi, Ph.D


                                       43
<PAGE>


CERTIFICATION PURSUANT TO
18 U.S.C.SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Sangui BioTech International,  Inc. (the
"Company")  on Form 10-KSB for the period ended June 30, 2002, as filed with the
Securities  and  Exchange  Commission  on the  date  hereof  (the  "Report"),the
undersigned  certifies,  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

(2)The  information  contained in the Report  fairly  presents,  in all material
respects, the financial condition and results of operations of the Company.


Date:    September 27, 2002                               /s/ Wolfgang Barnikol
                                                          ---------------------
                                                          Wolfgang Barnikol
                                                          President and Director

                                  CERTIFICATION

The undersigned, Prof. Dr. W. Barnikol, Chief Executive Officer and Chief
Financial Officer, certifies that:

         1.     I have reviewed this annual report on Form 10-KSB of Sangui
                BioTech International, Inc.

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

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


Date:    September 27, 2002     By:       /s/ W. Barnikol
                                   --------------------------------------
                                   Prof. Dr. W. Barnikol, Chief Executive
                                   Officer and Chief Financial Officer





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