10QSB 1 0001.txt FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 U. S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- --------------- Commission File No. 0-24480 SANGUINE CORPORATION (Name of Small Business Issuer in its Charter) NEVADA 95-4347608 ------ ---------- (State or Other Jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) 101 East Green Street, #11 Pasadena, California 91105 --------------------------- (Address of Principal Executive Offices) Issuer's Telephone Number: (626) 405-0079 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No (2) Yes X No --- --- --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Not applicable. APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: September 30, 2000 27,881,188 ---------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The Financial Statements of the Registrant required to be filed with this 10-QSB Quarterly Report were prepared by management, and commence on the following page, together with Related Notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant. SANGUINE CORPORATION (A Development Stage Company) Index to Financial Statements Page Balance sheet, September 30, 2000 (unaudited) F-1 Statement of operations for the three months and nine months ended September 30, 2000 and 1999 (unaudited) and for the period from January 18, 1989 (date of inception) to September 30, 2000 (unaudited) F-2 Statement of cash flows for the nine months ended September 30, 2000 and 1999 (unaudited) and for the period from January 18, 1989 (date of inception) to September 30, 2000 (unaudited) F-3 Notes to financial statements F-5 SANGUINE CORPORATION (A Development Stage Company) Balance Sheet September 30, 2000 (Unaudited) Assets Current assets: Cash $660,374 Total assets $660,374 Liabilities and Stockholders' Deficit Current liabilities: Related party accounts payable $129,394 Accrued salaries 569,000 Accrued interest payable 51,949 Deferred revenue 83,875 Notes payable 258,271 Total current liabilities 1,092,489 Stockholders' deficit: Common stock - par value $.001 per share. Authorized 100,000,000 shares; issued and outstanding 27,881,188 shares 27,881 Additional paid-in capital (Quasi- reorganized March 20, 1994 deficit retained earnings of $2,423,964 eliminated) 1,835,547 Deficit accumulated during the development stage (2,295,543) Total stockholders' deficit (432,115) Total liabilities and stockholders' deficit $660,374
SANGUINE CORPORATION (A Development Stage Company) Statement of Operations (Unaudited)
Cumulative Three Months Ended Nine Months Ended Amounts September 30, September 30, From 2000 1999 2000 1999 Inception Revenue $ 7,625 $ - $ 7,625 $ - $162,467 Expenses: Promotion - 12,965 3,805 17,191 55,899 Depreciation - - - 84 4,609 Research & Development 16,800 19,500 55,800 58,500 921,605 Office expense 2,171 4,193 8,840 12,724 102,093 Auto expense 2,091 2,905 6,392 7,836 33,311 Salaries 8,500 4,500 17,500 13,500 129,608 Legal & Professional fees 8,445 6,616 77,454 17,447 218,685 Rent 3,356 3,155 9,560 9,344 108,351 Interest expense 6,691 5,425 31,809 15,382 101,636 Stock transfer - - - 300 4,829 Taxes & License 4,537 80 6,372 1,673 31,667 Travel 5,707 - 12,277 - 33,002 Insurance 2,165 6,158 4,448 18,782 26,471 Consulting 92,000 - 359,500 - 657,020 Bad debt - - - - 10,000 Finder fees - - - - 7,825 Total expenses 152,463 65,497 593,757 172,763 2,446,611 Loss before income taxes (144,838) (65,497) (586,132) (172,763) (2,284,144) Income tax expense - - - - - Net loss $(144,838)$(65,497)$(586,132)$(172,763)$(2,284,144) Loss per share $ (.01)$ - $ (.02)$ (.01)$ (.17) Weighted average number of shares outstanding 25,256,445 23,067,994 24,106,461 23,067,994 13,162,766
SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited)
Cumulative Nine Months Ended Amounts September 30, From 2000 1999 Inception Cash flows from operating activities: Net loss $(586,132) $(172,763) $(2,295,543) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation - 84 4,609 Non cash expenses 419,500 - 857,302 Changes in operating asset & liabilities: (Decrease) increase in accounts payable 50,714 62,225 129,394 Increase in interest payable 13,069 4,095 51,949 Increase in accrued salaries 45,000 72,000 569,000 Increase in deferred reveune 83,875 - 83,875 Net cash provided by (used in) operating activities (26,026) (34,359) (599,414) Cash flows from investing activities - purchase of equipment - - (4,609) Net cash used in investing activities - - (4,609) Cash flows from financing activities: Net (payment on) proceeds from notes payable (2,035) 25,356 166,271 Sales of common stock 635,321 9,500 1,097,376 Contributed capital - - 750 Net cash provided by financing activities 633,286 34,856 1,264,397 Net increase (decrease) in cash 659,312 497 660,374 Cash, beginning of period 1,062 499 - Cash, end of period $660,374 $ 996 $660,374
SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited) Continued
Cumulative Nine Months Ended Amounts September 30, From 2000 1999 Inception Supplemental disclosure of cash flow information: Interest paid $ - $15,382 $86,573 Income taxes paid $ - $ - $ -
SANGUINE CORPORATION (A Development Stage Company) Notes to Financial Statements September 30, 2000 1. Corporate History The Company was incorporated January 27, 1974, in the State of Utah, using the name Sight and Sound Systems, Inc. On July 8, 1974, the Company changed its name to International Health Resorts, Inc., and on June 25, 1993, the Company filed a Certificate of Amendment changing the name to Sanguine Corporation. In May of 1992, the Company changed its domicile to the State of Nevada. The stated purpose of the Company is to engage without qualification, in any lawful acts, or activity for which a corporation may be organized under the laws of the state of Nevada. Currently, the Company is engaged in developing artificial blood to be used by the medical profession. The company is conducting research and development leading to F.D.A. clinical trials. The Company forward split its outstanding shares 1.5 shares for 1 on July 14, 1993. As a consequence of this action, the Company had 1,431,000 shares issued and outstanding prior to the Agreement and Plan of Reorganization in which Sanguine Corporation (a California Corporation) was acquired. On June 14, 1993, the Company entered into an Agreement and Plan of Reorganization, wherein it was agreed that Sanguine Corporation (a Nevada Corporation) would issued 14,589,775 shares of its common stock to acquire 94% of the issued and outstanding shares of stock of Sanguine Corporation (a California Corporation). From 1974 to 1989, the Company engaged in several business ventures. These business activities resulted in the loss of all Company assets. Because of the search for a new business venture, the Company has entered into the "development stage company" status again. Sanguine Corporation (California) is a development stage company and these financial statements are presented as those of a development stage company effective January 18, 1989, coinciding with the incorporation date of Sanguine Corporation (California). 2. Statement Preparation The Company has prepared the accompanying financial statements with interim financial reporting requirements promulgated by the Securities and Exchange Commission. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1999 Annual Report on Form 10-KSB. The results of operations for the period ended September 30, 2000 are not necessarily indicative of the operating results for the full year. 3. Deferred Revenue During the period ended September 30, 2000, the Company received $91,500 for the sale of the rights to represent the Company and to receive a 1% royalty on sales in Greece for a period of three years. Accordingly, the revenue associated with this agreement will be recognized over the three year term. As of September 30, 2000, a balance of $83,875 remained in deferred revenue. 4. Related Party Loan During the period ended September 30, 2000, the Company retained Starpoint Procurement Company as a marketing and joint venture corporate advisor in exchange for $92,000. The payment of $92,000 was made by an officer of the Company and is therefore reflected as a note payable at September 30, 2000. 5. Private Placement During September 2000, the Company closed a Private Placement Offering Agreement with Laidlaw Global Securities, Inc. The amount of securities subscribed for and accepted was $817,985 for 1,635,970 units. Each unit consists of two shares of common stock at $0.001 par value per share, and one redeemable common stock purchase warrant entitling the holder to purchase one share of common stock. The warrants are exercisable at $0.40 per share and expire on August 29, 2004. Net proceeds received after offering expenses was $611,421. 6. Subsequent Event In June 2000, the Company entered into an agreement to grant warrants to purchase twelve million shares of common stock at an exercise price of $0.30 in relation to consulting services. The warrant grant was approved by the board of directors on November 10, 2000, and amended to reduce the exercise period from five years to one year after the registration of such warrants. In addition, the exercise price was reduced from $0.30 per share to $0.25 per share. A significant expense of approximately $4.5 million related to the grant of these warrants will be recorded in the fourth quarter when the grant was approved by the board of directors. Item 2. Management's Discussion and Analysis or Plan of Operation. -------------------------------------------------------------------- Plan of Operation. ------------------ The Company has conducted all of its business operations through its majority owned subsidiary, Sanguine Corporation, a California corporation ("Sanguine California"). Sanguine California is engaged in the development of a second generationn synthetic red blood cell product called "PHER-O2." The development of this product presently comprises its sole business operations. PHER-O2 is composed of perfluoro-decalin molecules (i.e., synthetic red blood cells), purified water and a proprietary, synthetic, fluorinated surfactant to hold the emulsion together. Perfluoro-decalin has great oxygen-carrying capacity, yet it can be as much as 900 times smaller than a red blood cell. Management believes that PHER-O2 may carry three to four times the oxygen of human blood per unit volume. This increased oxygen-carrying capacity may make PHER-O2 useful in the treatment of heart attacks, strokes, cancer and other diseases for which increased oxygenation is beneficial. Furthermore, the Company believes that perfluoro-decalin may be effective as an imaging agent in X-ray imaging, nuclear magnetic resonance (NMR) imaging and CAT scans, without side effects. Management also believes that PHER-O2 has several other advantages over human blood: it can be sterilized to be free of disease; is believed to have the quality of a universal match for all blood types; can be mass-produced; and may be stored much longer than human blood. It is anticipated that on completion of the compounding of PHER-O2, the Company, through a subcontractor, will perform initial gross animal tests, which do not require regulatory approval prior to commencement; however, the data gathered from any such tests will be subject to regulatory review in the future. The Company anticipates that it will manufacture experimental doses of PHER-O2 required to conduct gross animal testing. It is anticipated that continued research and development of PHER-O2 will depend upon the Company's ability to obtain substantial additional equity or debt funding, as to which no assurance can be given. See the captions "Business Development," "Future Capital Requirements; Uncertainty of Future Funding" and "Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts" of the Company's Annual Report on Form 10-KSB for the calendar year ended December 31, 1999, which has previously been filed with the Securities and Exchange Commission and is incorporated herein. A portion of the funds derived from its recent private placement that was completed on August 29, 2000, will also be utilized for this research and development. In its second phase of operations, management intends to continue developing the perfluorocarbon compounds in PHER-O2 in order to optimize its quality, and expects to begin animal safety and efficacy trials in accordance with guidelines of the United States Food and Drug Administration ("FDA") and comparable foreign regulatory requirements. In the final phase of the Company's proposed business operations, it intends to complete its United States testing of PHER-O2, receive all necessary FDA approvals and begin American and Canadian sales for blood transfusions, cancer treatment and angioplasty; and complete overseas testing, begin overseas sales and begin the construction of manufacturing facilities. Sanguine California has previously licensed BioLogix Development Partners, an unaffiliated California limited partnership, to manufacture and market PHER-O2 in Canada, including any future Canadian patent rights, and the exclusive right to market PHER-O2 in U.S. military pre-hospital markets. In this final phase, the Company also intends to continue trials to test PHER-O2 for other applications, including transplant organ preservation and the treatment of carbon monoxide poisoning, sickle cell anemia, heart attack and stroke. The Company will be required to conduct similar rigorous testing and clinical trials of PHER-O2 for each desired application for which it is sought to be used. PHER-O2 is still in the research and development stage. It has not been tested on animals or humans; nor has any application been submitted to any federal, state or foreign agency to seek authority for such testing. This development process will be time consuming, costly, subject to extreme governmental regulation and must prove that this product is safe and efficacious for human use. Until then, the Company will have no potential for revenues from operations. No assurance can be given that the Company will be able to raise the capital it will need to develop PHER-O2, or that if sufficient funds are raised, the Company will ever receive requisite federal, state or foreign agency approval to manufacture or market this product. See the captions "Business Development," "Special Risk Factors," "Principal Products or Services and their Markets," "Competition," "Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts" and "Governmental Approval of Principal Products or Services" of the Company's Registration Statement on Form 10-SB-A1, which has previously been filed with the Securities and Exchange Commission, and which is incorporated herein by reference. Results of Operations. ---------------------- During the quarterly period ending September 30, 2000, the Company's only business operations were those of Sanguine California. During this period, the Company received total revenues of $7,625 from the sale of rights to represent the Company and receive a 1% royalty on sales in Greece for three years and sustained a net loss of ($144,838). Liquidity. ---------- During the quarterly period ended September 30, 2000, the Company had total expenses of $152,463, while receiving $7,625 in revenues; compared to the period ended September 30, 1999, the Company had total expenses of $65,497, while receiving $0 in revenues. The Company as of September 30, 2000, had $660,374 in cash, with $1,092,489 in current liabilities. The Company received $91,500 on August 3, 2000, for the sale of the rights to represent the Company and to receive a 1% royalty on sales in Greece for a period of three years; and an additional $691,506 net proceeds after a private offering, less expenses was received on September 1, 2000. During the period ended September 30, 2000, the Company retained Starpoint Procurement Company as a marketing and joint venture corporate advisor in exchange for $92,000. The payment of $92,000 was made by an officer of the Company and is therefore reflected as a note payable at September 30, 2000. PART II - OTHER INFORMATION Item 1. Legal Proceedings. ---------------------------- None; not applicable. Item 2. Changes in Securities and Use of Proceeds. --------------------------------------------------- None; not applicable. Item 3. Defaults Upon Senior Securities. ------------------------------------------ None; not applicable. Item 4. Submission of Matters to a Vote of Security Holders. -------------------------------------------------------------- None; not applicable. Item 5. Other Information. ---------------------------- The Company recently completed a private placement of units that was closed on August 29, 2000. The amount of securities subscribed for and accepted was $817,985 for 1,635,970 units. Each unit consisted of two shares of common stock at $0.001 par value per share, and one redeemable common stock purchase warrant entitling the holder to purchase one share of common stock. The warrants are exercisable at $0.40 per share and expire on August 29, 2004. An 8-K Current Report dated September 1, 2000, regarding the offer and sale of these securities has been filed with the Securities and Exchange Commission and is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K. ------------------------------------------- (a) Exhibits. 10-SB-A1 Registration Statement.* Form 10-KSB Annual Report for the Fiscal Year ended December 31, 1999.* (b) Reports on Form 8-K. 8-K dated June 8, 2000.* 8-K dated September 1, 2000.* 8-K dated September 18, 2000.* * Incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. SANGUINE CORPORATION Date: 11/20/00 By:/s/Thomas C. Drees --------- ------------------------------------- Thomas C. Drees, CEO, President and Chairman of the Board of Directors Date: 11/20/00 By:/s/Anthony G. Hargreaves --------- ------------------------------------- Anthony G. Hargreaves Vice President, Secretary/Treasurer and Director Date: 11/20/00 By:/s/David E. Nelson --------- ------------------------------------- David E. Nelson CFO and Director