-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CDcTCAQJD2s9y5uCrFZR4xU7aML+6p0Amf3acWz/aNS6+SkF+QS/cwBIzIMTs6nc o9H72asS9X53b0Ig04bEaQ== 0001010412-01-500076.txt : 20010608 0001010412-01-500076.hdr.sgml : 20010608 ACCESSION NUMBER: 0001010412-01-500076 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANGUINE CORP CENTRAL INDEX KEY: 0000926287 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 954347608 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: SEC FILE NUMBER: 333-49044 FILM NUMBER: 1655803 BUSINESS ADDRESS: STREET 1: 101 EAST GREEN ST STREET 2: #11 CITY: PASADENA STATE: CA ZIP: 91105 BUSINESS PHONE: 8184050079 MAIL ADDRESS: STREET 1: 101 EAST GREEN ST STREET 2: STE 11 CITY: PASADENA STATE: CA ZIP: 91105 POS AM 1 sb2posteff.txt As filed with the Securities and Exchange Commission on June 7, 2001, Registration No. 333-49044. ============================================================================== U.S. Securities and Exchange Commission Washington, D.C. 20549 Form SB-2 Post Effective Amendment No. 1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SANGUINE CORPORATION -------------------- (Name of small business issuer in its charter) Nevada 2835 95-4347608 ------ ---- ---------- (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) 101 East Green Street, #11 Pasadena, California 91105 (626) 405-0079 -------------- (Address and telephone number of principal executive offices) 101 East Green Street, #11 Pasadena, California 91105 -------------------------- (Address of principal place of business or intended principal place of business) Thomas C. Drees, Ph.D. 101 East Green Street, #11 Pasadena, California 91105 -------------------------- (Name, address and telephone number of agent for service) Copies to: Branden T. Burningham, Esq. 455 East 500 South, Suite 205 Salt Lake City, Utah 84111 (801) 363-7411 Approximate date of proposed sale to the public: As soon as practicable after the effective date of this post effective amendment to this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] ============================================================================== CALCULATION OF REGISTRATION FEE Title of Each Proposed Proposed Class of Maximum Maximum Securities Amount of Offering Aggregate Amount of to be shares to be Price per Offering Registration Registered Registered Share (1) Price (1) Fee ============================================================================== Common Stock(2) 5,998,701 $0.4375 $2,624,431 $2,189.09 ============================================================================== (1) Estimated solely for the purpose of calculating the registration fee under Rule 457(c) under the Securities Act on the basis of the average of the bid and asked price of our common stock as quoted on the OTC Electronic Bulletin Board on October 31, 2000. (2) We are registering 5,998,701 shares of common stock that the selling stockholders may sell as outlined herein. In accordance with Rule 416 promulgated under the Securities Act, a presently undeterminable number of shares of common stock are also being registered hereunder which may be issued in the event the anti-dilution provisions of our outstanding warrants become operative. SANGUINE CORPORATION 5,998,701 Shares of Common Stock This prospectus covers an aggregate of 5,998,701 shares of our common stock that the selling stockholders may sell as outlined herein. It has been filed with the Securities and Exchange Commission as part of a registration statement that you may examine in the Securities and Exchange Commission's EDGAR Archives. Our common stock is quoted on the OTC Bulletin Board of the National Association of Securities Dealers, Inc.(the "NASD") under the symbol "SGNC." Our common stock bid and asked prices on May 31, 2001, were $0.25 bid and $0.27 asked. These securities involve a high degree of risk. See the caption "Risk Factors," beginning on page 4 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved any of these securities or passed upon the adequacy or accuracy of the prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is __________, 2000. 1 TABLE OF CONTENTS Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Forward-Looking Information . . . . . . . . . . . . . . . . . . . . . . 8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Determination of Offering Price and Dilution. . . . . . . . . . . . . . 9 Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .9 Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 11 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Directors, Executive Officers, Promoters and Control Persons . . . . . 13 Security Ownership of Certain Beneficial Owners and Management . . . . 17 Description of Securities . . . . . . . . . . . . . . . . . . . . . . .19 Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . .21 Disclosure of Commission Position on Indemnification for Securities . .22 Act Liabilities Description of Business . . . . . . . . . . . . . . . . . . . . . . . 23 Management's Discussion and Analysis or Plan of Operation . . . . . . .33 Description of Property . . . . . . . . . . . . . . . . . . . . . . . .36 Certain Relationships and Related Transactions . . . . . . . . . . . . 36 Market for Common Equity and Related Stockholder Matters . . . . . . . 36 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 38 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 41 Changes in and Disagreements with Accountants on Accounting and . . . .63 Financial Disclosure Available Information . . . . . . . . . . . . . . . . . . . . . . . . .64 Dealer Prospectus Delivery Obligations . . . . . . . . . . . . . . . . 65 2 PROSPECTUS SUMMARY SANGUINE CORPORATION -------------------- The Company ----------- You should carefully read our entire prospectus and consolidated financial statements and related notes. Unless the context requires otherwise, "we," "us," "our" and similar terms, as well as references to "Sanguine," refer to Sanguine Corporation, a Nevada corporation, and its 94% owned subsidiary, Sanguine Corporation, a California corporation. We are engaged in the development of a synthetic red blood cell product called "PHER-O2." Our product is in the research and development stage. No government has approved its use or the testing of its efficacy. We have never sold any PHER-O2. We have generated only limited revenues from the sale of licenses or rights to market PHER-O2 if it ever proves to be useful and its use is approved. Our offices, consisting of approximately 970 square feet of office space, are located at 101 East Green Street, #11, Pasadena, California 91105. Our telephone number is (626) 405-0079. The Offering ------------ Securities offered by us . . . .None. Securities that may be sold by our stockholders . . . . . . 5,998,701 shares of our common stock. Use of proceeds . . . . . . . . We will not receive any money from the selling stockholders when they sell shares of our common stock; however, we may receive up to $629,848.45 from the exercise of outstanding warrants to acquire shares that are being registered. As of the date of this prospectus, none of these warrants has been exercised. Offering Price . . . . . . . . .Market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices or at fixed prices, all of which may change. Transfer Agent . . . . . . . . .Colonial Stock Transfer, 455 East 400 South, Suite #100, Salt Lake City, Utah 84111, serves as the transfer agent and registrar for our outstanding securities. We have agreed to pay all costs and expenses relating to the registration of our common stock. The selling stockholders will be responsible for any related commissions, taxes, attorney's fees and other charges relating to the offer or sale of these securities. The selling stockholders may sell their common stock through one or more broker/dealers, and these broker/dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the selling stockholders as they shall agree. 3 RISK FACTORS ------------ Our present and intended business operations are highly speculative and involve substantial risks. Only investors who can bear the risk of losing their entire investment should consider buying our shares. Among the risk factors that you should consider are the following: General Risks Related To Our Business. - -------------------------------------- If we do not meet our research and development goals or obtain regulatory approvals, our business may fail. - --------------------------------- We have not received any revenues from the sale of our only product, PHER-O2. Our ability to sell our product will depend upon our ability to successfully develop, obtain regulatory approval for, manufacture and market it. No one has performed many tests of any kind on PHER-O2. In addition, it takes a long, uncertain amount of time to achieve regulatory approval and market success. Our product may require significant additional research and development, and extensive preclinical and clinical testing, before we may be able to obtain United States Food and Drug Administration ("FDA") approval for any use, if at all. We can not assure you that: our research and development activities may be successful; our product may prove to be safe or effective in any testing or trials that are conducted; we may obtain FDA approval; we may be able to manufacture our product at a cost that will make it commercially viable; or if and when it receives any approval, we may be able to market it successfully. If we do not receive additional funding, we may not be able to develop our product. - ------------ We have limited operating capital. We estimate that we will need about $20,000,000 to develop our product through the anticipated FDA and comparable foreign agency approval. We will need to raise these funds through equity or debt offerings, which will be very difficult for such a highly speculative enterprise. $629,848.45 of these funds may be available to us if the warrants are exercised, but any exercise of these warrants will depend upon the market price for our common stock being substantially higher than the exercise prices of the warrants. We can not assure you that we may be able to get the required funding or that any funding will be on terms satisfactory to us. This funding may also cause substantial dilution to our existing stockholders. If we do not get the required funding, we believe that we may be unable to develop our product for its intended uses, and our business may fail. 4 We face substantial governmental regulation and product approval requirements. - ------------- We will face extensive regulation by several governmental authorities in the United States and foreign countries. These regulations may affect our research and development activities, as well as preclinical and clinical trials, manufacturing and marketing of our product. All trials, manufacturing and marketing of our product will have to undergo the rigorous testing and approval processes of the FDA and corresponding foreign regulatory bodies. Each clinical trial must be conducted under the auspices of an Independent Review Board, which will consider, among other factors: ethical considerations; the safety of human subjects; and the possible liability of the institution. The regulatory process, which includes pre-clinical, clinical and post- clinical testing of the product to establish its safety and efficacy, can take years and requires the expenditure of large amounts of money. Data obtained from these trials is always subject to varying interpretations, all of which may extend the process, or result in limited or denied approval. Regulations often change during the approval process, and these changes may cause further delay and additional expense, and may prohibit approval. We may encounter similar problems in foreign countries. We can not assure you that we may get regulatory approval even after spending this time and money. If we do obtain it, we can not guarantee that we may be able to commercially and economically market the product. Even if we get approval, our product and facilities may face continual review and periodic inspections. The subsequent discovery of previously unknown problems with the product, the manufacturer or its facilities may result in further restrictions on the product or the manufacturer, and may include withdrawal of the product from the market. If we fail to adhere to the stringent governmental regulations, we may also receive fines, suspensions of regulatory approval, product recalls, operating restrictions and criminal prosecution of our principals. Because we do not have patent protection, we may lose business to competitors with similar technologies. - -------------------------------------- We have no patents on our product, and have filed only one United States patent application and one foreign patent application. We can not assure you that we will be able to prove our product to be efficacious and to obtain any required governmental approvals during the life of any patent or any extensions of any patent that may be granted. Patents offer some protection for products, but they are generally highly uncertain and involve complex legal and factual questions. To date, no consistent policy has emerged as to the breadth of claims allowed in biotechnology patents. We can not guarantee that any patent may protect us against competitors with similar technologies or who develop similar technologies. 5 If we are unable to compete with larger competitors, our business may fail. - ----- If it is proved efficacious for its intended uses and approved for use by the FDA or any corresponding foreign agencies, PHER-O2 may compete directly with established therapies for blood loss. Patients whose oxygen-carrying ability has been significantly depleted by blood loss frequently receive transfusions of red blood cells. Patients who have suffered more moderate blood loss can be treated with various intravenous solutions, such as saline or human serum albumin, which replace the volume of blood lost, but not its oxygen carrying capacity. Even if the FDA or any corresponding governmental agency approves this product for use, it may not have any significant advantages over other products to cause the medical profession to adopt it rather than continue to use established therapies. We will also be competing with many other companies, research foundations and institutions seeking to develop synthetic blood products. Almost all of these entities may have substantially greater resources, personnel and facilities than we may have, even if we succeed in raising the required capital to fund our proposed business operations. We can not assure you that we may even be able to raise the necessary funding. If we lose Dr. Drees or Mr. Hargreaves, our operations will suffer. ------------------------------------------------------------------- Thomas C. Drees, Ph.D., our President and Chief Executive Officer, is the inventor of PHER-O2. He previously served for ten years as the President and CEO of Alpha Therapeutics Corporation, a subsidiary of Green Cross Corporation of Japan, that developed "Fluosol DA 20," the only synthetic blood product that has received FDA approval to date. He has also written a widely-acclaimed book on this subject, "Blood Plasma: The Promise and the Politics," Ashley Books, New York, 1983. Dr. Drees has been with us since inception, and his retirement, disability or death may significantly impair the development of our product and our intended business operations. Anthony G. Hargreaves, who is the Vice Chairman of the Board of Directors, and our Vice President and Secretary/Treasurer, has significant background in the medical field. This includes service as General Manager of VK Limited of Pasadena, California, where he was instrumental in securing funding for a wearable, continuously-operating artificial kidney machine. Mr. Hargreaves has been with us since our inception, and his retirement, disability or death could also hurt our operations. We also believe that our newly-appointed members of management are very important to our success. Successful product liability claims may seriously impair our operations. - ----------- The use of PHER-O2 in clinical trials and, if we receive regulatory approval, the manufacture and marketing of this product, may expose us to liability claims. These claims may seriously impair our business. Claims may be made by users of the product or by entities that sell it. As a result, it must be rigorously purified because impurities may lead to serious and potentially 6 fatal toxic reactions. We intend to seek limited product liability insurance, subject to available funding, before we begin any human clinical trials. However, this insurance coverage is expensive, and we can not assure you that we will be able to obtain it. If we can obtain it, we can not guarantee that it will be at a reasonable cost or in sufficient amounts to protect us against losses that may result from this liability. If we do not obtain insurance at an acceptable cost, or otherwise protect against potential product liability, we may not be able to commercialize our product. You will not be able to elect our directors or officers. -------------------------------------------------------- Our President and Chief Executive Officer, Thomas C. Drees, Ph.D., has substantial voting control of our company. He can effectively elect all of our directors, who in turn elect all of our executive officers, without regard to the votes of other stockholders. The auditor's "going concern" qualification in our financial statements might create additional doubt about our ability to stay in business. - -------------------------------------------------------------------- Our Independent Auditors' Report issued on March 8, 2001, with respect to our audited financial statements for the years ended December 31, 2000 and 1999, expresses substantial doubt about our ability to continue as a going concern, due to our negative cash flows. Risks Related To Our Common Stock. - ---------------------------------- Due to the great instability in our common stock price, you may not be able to sell your shares at a profit. - ------------------------------------- The public market for our common stock is limited and volatile. As with the market for many other biotechnological companies, any market price for our shares is likely to continue to be very volatile. In addition, factors such as the following may significantly affect our stock price: results of our clinical trials; our competitors' announcements and successes or failures; other evidence about the safety or efficacy of our product; announcements of new competitive products or failures by our competitors; increased governmental regulation of our product; our competitors' developments of patents or proprietary rights; and fluctuations in our operating results. 7 In addition, the stock markets generally have experienced and continue to experience extreme price and volume fluctuations. These fluctuations have affected the market price of many biotechnological companies and have often been unrelated to these companies' operating performance. These broad market fluctuations, as well as general economic and political conditions, may reduce the market price of our common stock. The sale of already outstanding shares of our common stock may hurt our common stock market price. - -------------------------- Approximately 12,187,613 shares of our common stock are publicly traded. This number will be increased by the 3,453,134 presently outstanding shares that may be offered by and have not been presently sold under this prospectus, along with the 1,799,567 shares underlying the warrants that also may be offered by this prospectus. Furthermore, most shares that are owned by members of management have been held for a sufficient period of time that they may sell the allowed percentage of these shares under Rule 144 of the Securities and Exchange Commission. These shares of our common stock will substantially increase the number of shares that may be available for public trading. The sale of these shares in the public market may reduce the price of our common stock. Our common stock is deemed to be "penny stock." ----------------------------------------------- Our common stock is presently deemed to be "penny stock" that can only be purchased by certain qualified persons, and broker/dealers are required to determine that the purchase of securities that are "penny stocks" are suitable investments for customers before completing the purchase of any of these securities. This designation may limit the public market for our common stock. FORWARD-LOOKING INFORMATION --------------------------- This is a summary of the terms of the common stock described in and offered by this prospectus. It does not contain all of the information that may be important to you. This prospectus contains "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contained in this prospectus involve known and unknown risks, uncertainties and other factors that could cause actual results, financial or operating performance to differ from the future results, financial or operating performance or achievements expressed or 8 implied by these forward-looking statements. You should carefully read the this prospectus and the risks factors outlined above, along with the more detailed information, financial statements and the notes to the financial statements appearing elsewhere in this prospectus before you decide whether to purchase the common stock described in this prospectus. USE OF PROCEEDS --------------- We will not receive any part of the proceeds from sale of our common stock. However, we will receive $629,848.45, if all of the warrants are exercised. As of the date of this prospectus, none of these warrants has been exercised. DETERMINATION OF OFFERING PRICE AND DILUTION -------------------------------------------- We will not receive any money from the selling stockholders when they sell their shares of common stock, though we will receive funds from any exercise of the warrants. The selling stockholders may sell all or any part of their shares in private transactions or in the over-the-counter market at prices related to the prevailing prices of our common stock at the time of negotiation. Because we cannot accurately predict the prices of these sales, we cannot accurately estimate the amount of any dilution that may result from the purchase price of any of these shares. "Dilution" is the difference between the price paid for the shares and our "net tangible book value." The net tangible book value (deficit) of our common stock on March 31, 2001, was ($1,355,393) or ($0.048) per share. Net tangible book value per share is determined by subtracting our total liabilities from our total tangible assets and dividing the remainder by the number of shares of common stock outstanding. Taking into account the exercise of all warrants as of March 31, 2001, our net tangible book value (deficit) at that date would be ($725,545), divided by 29,985,755 outstanding shares, resulting in a per share net tangible book value (deficit) of ($0.024). As of the date of this prospectus, none of these warrants has yet been exercised. The offer and sale by the selling stockholders of the common stock that is outstanding, or those shares underlying the warrants, will not have any effect on the net tangible book value (deficit)of our common stock, after taking into account the exercise of the warrants. We can not assure you that any public market for our common stock will equal or exceed the sales price of our shares of common stock sold by our stockholders. Purchasers of our shares face the risk that their shares will not be worth what they paid for them. SELLING SECURITY HOLDERS ------------------------ The following table provides information about the selling stockholders and the common stock that each may sell, or retain after this offering, if any: 9 Common Stock (1) --------------- Names of Selling Number of Shares Number of Shares Number of Shares Stockholders Beneficially to be Beneficially Owned in the Offering Owned Registered after the Offering - --------------- ---------------- ---------------- ------------------ Technogest S. A. 1,533,000 (3) 1,533,000 (3) -0- (3) Wegelin & Co. 1,499,910 (3) 1,499,910 (3) -0- (3) Sun Investment 375,000 (3) 375,000 (3) -0- (3) Partnership II Geronimo Partners, 1,500,000 (3) 1,500,000 (3) -0- (3) LP Laidlaw Global 1,490,791 (4) 490,791 (4) 1,000,000 Securities, Inc. Michael Dancy 600,000 (5) 600,000 (5) -0- (5) --------- ---------- --------- 6,998,701 5,998,701 1,000,000 (1) We assume no purchase in this offering by the selling stockholders of any shares of our common stock. (2) No director, advisory director, executive officer or any "associate" of any director, advisory director or executive officer has any interest, direct or indirect, by security holdings or otherwise, in any of the selling stockholders. (3) Includes these shares underlying warrants: Technogest S. A., 511,000; Wegelin & Co., 499,970; Sun Investment Partnership II, 125,000; and Geronimo Partners, LP, 500,000. Assumes that all warrants are exercised and all common stock owned and/or received on the exercise of the warrants are sold. The following sales have already been made under this registration statement and prospectus: Technogest, 81,000 shares; Wegelin & Co., 20,000 shares; and Sun Investment Partnership, 45,000 shares. (4) Includes 163,597 shares underlying warrants, and assumes that all warrants are exercised and all common stock owned and/or received on the exercise of the warrants, excepting 1,000,000 shares that are not included in our registration statement or prospectus are sold. (5) Assumes that all 600,000 shares that are owned will be sold, and all 600,000 of these shares have already been sold under this registration statement and prospectus. 10 PLAN OF DISTRIBUTION -------------------- We are registering the shares of our common stock covered by this prospectus. We will pay the costs, expenses and fees of registering our common stock. All of the selling stockholders will be responsible for any related commissions, taxes, attorney's fees and other charges that each may incur in connection with the offer or sale of these securities. The selling stockholders may sell our common stock at market prices prevailing at the time of the sale, at prices related to the prevailing market prices, at negotiated prices or at fixed prices, any of which may change. They may sell some or all of their common stock through: ordinary broker's transactions, which may include long or short sales; purchases by brokers, dealers or underwriters as principal and resale by those purchasers for their own accounts under this prospectus; market makers or into an existing market for our common stock; transactions in options, swaps or other derivatives; or any combination of the selling options described in this prospectus, or by any other legally available means. In addition, the selling stockholders may enter into hedging transactions with broker/dealers, who may engage in short sales of our common stock in the course of hedging the positions they assume. Finally, they may enter into options or other transactions with broker/dealers that require the delivery of our common stock to those broker/dealers. Subsequently, the shares may be resold under this prospectus. In their selling activities, the selling stockholders will have to comply with applicable provisions of the Securities Exchange Act of 1934 (the "Exchange Act"), and its rules and regulations, including Regulation M. These may limit the timing of purchases and sales of our common stock by the selling stockholders. The selling stockholders and any broker/dealers involved in the sale or resale of our common stock may qualify as "underwriters" within the meaning of Section 2(11) of the Securities Act. In addition, the broker/dealers' commissions, discounts or concessions may qualify as underwriters' compensation under the Exchange Act. If any broker/dealer or selling stockholder qualifies as an "underwriter," he/it will have to deliver our prospectus as required by Rule 154 of the Securities and Exchange Commission. In addition, any broker/dealer that participates in a distribution of these shares will not be able to bid for, purchase or attempt to induce any person to bid for or purchase any of these shares as long as the broker/dealer is participating in the distribution. The ability of participating broker/dealers to stabilize the price of our shares will also be restricted. 11 If the selling stockholders sell our shares to or through brokers, dealers or agents, they may agree to indemnify these brokers, dealers or agents against liabilities arising under the Securities Act or the Exchange Act. We do not know of any existing arrangements between the selling stockholders and any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of our common stock. In addition to selling their common stock under this prospectus, the selling stockholders may: transfer their common stock in other ways not involving market makers or established trading markets, including by gift, distribution or other transfer; or sell their common stock under Rule 144 of the Securities and Exchange Commission, if the transaction meets the requirements of Rule 144. We have advised the selling stockholders that during the time they are engaged in the distribution of our common stock that they own, they must comply with Rule 10b-5 and Regulation M promulgated by the Securities and Exchange Commission under the Exchange Act. They must do all of the following under this Rule and Regulation: not engage in any stabilization activity in connection with our common stock; furnish each broker who may be offering our common stock on their behalf the number of copies of this prospectus required by each broker; not bid for or purchase any of our common stock or attempt to induce any person to purchase any of our common stock, other than as permitted under the Exchange Act; not use any device to defraud; not make any untrue statement of material fact or fail to state any material fact; and not engage in any act that would operate as a fraud or deceit upon any person in connection with the purchase or sale of our shares. To the extent that any selling stockholder may be an "affiliated purchaser" as defined in Regulation M, he/it has been further advised that he/it must coordinate his/its sales under this prospectus with us for the purposes of Regulation M. 12 To the extent required by the Securities Act, a supplemental prospectus will be filed, disclosing: the name of any broker/dealers; the number of securities involved; the price at which the securities are to be sold; the commissions paid or discounts or concessions allowed to the broker/dealers, where applicable; that the broker/dealers did not conduct any investigation to verify the information set out in this prospectus, as supplemented; and other facts material to the transaction. There is no assurance that any selling stockholder will sell any of our common stock. LEGAL PROCEEDINGS ----------------- We are not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or other person who may be deemed to be our "affiliate" or who is the owner of record or beneficially of more than five percent of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ------------------------------------------------------------ The following table sets forth the names of all of our current directors and executive officers. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignations or terminations.
Directors and Executive Officers. - --------------------------------- Date of Date of Positions Election or Termination Name Held Designation or Resignation ---- ---- ----------- -------------- Thomas C. Drees, CEO 6/93 * Ph.D. President 1/98 * Chairman 11/95 * Director 6/93 * Anthony G. Hargreaves Vice Chairman 9/00 * Vice President 6/93 * Secretary/ 6/93 * Treasurer 6/93 * Director 6/93 * Chief Financial 6/94 3/96 Officer Rear Admiral (Retired) COO 10/00 5/01 Merton Dick Van Orden Director 10/00 5/01 David E. Nelson, CPA Director 3/96 * Chief Financial 3/96 * Officer Edward L. Kunkel, Esq. Director 4/94 * * These persons presently serve in the capacities indicated.
13 Medical Advisory and Applications Board of Directors. - ----------------------------------------------------- Date of Date of Positions Election or Termination Name Held Designation or Resignation ---- ---- ----------- -------------- Rear Admiral (Retired) Chairman 10/00 5/01 Merton Dick Van Orden Craig Morrison, M.D. Member 10/00 * William Regelson, M.D. Member 10/00 * Leon Cass Terry, M.D., Member 10/00 * Ph.D. Herbert J. Meiselman, Member 10/00 * Sc.D.
Thomas C. Drees, Ph.D., MBA, CEO, President and a Director. Dr. Drees, age 72, is the founder of Sanguine California. Dr. Drees was Vice President and General Manager of Abbott Scientific Products Division, collector of blood plasma derivatives and manufacturer of human blood derivatives from 1973 to 1978. From 1978 to 1984, he was the President and CEO of Alpha Therapeutics Corporation, a subsidiary of Green Cross Corporation of Japan and the developer of Fluosol DA 20, the only FDA-approved synthetic blood product. For 26 years, Dr. Drees has been involved at top management levels with the collection, manufacture and marketing of human blood plasma derivatives. He has written many publications on the subject, including the widely-acclaimed book "Blood Plasma: The Promise and the Politics," Ashley Books, New York, 1983. Anthony G. Hargreaves, Vice Chairman, Vice President, Secretary/Treasurer and Director. Mr. Hargreaves is 73 years of age. He is a former Royal Marine Officer with long experience in marketing, trust department banking (with Bank of America) and group insurance sales management (with the Connecticut General Life Insurance Company). His medical background includes service as General Manager of VK Limited in Pasadena, California, where Mr. Hargreaves helped secure funding for a wearable, continuously operating artificial kidney machine. In the early 1980's, Mr. Hargreaves organized and scripted telemarketing sales of various products to retail stores throughout the United States. 14 David E. Nelson, CPA, Chief Financial Officer and Director. Mr. Nelson, age 57, received a B.S. degree in accounting from the University of Utah in 1966. He has over 20 years' experience in operations, finance and regulatory compliance of stock brokerage firms. He is the past President of Covey & Company, Inc., a broker/dealer formerly registered with the Securities and Exchange Commission. Mr. Nelson has been a member of the NASD's Board of Arbitrators, the American Institute of Certified Public Accountants and the Utah Association of Certified Public Accountants. Edward L. Kunkel, Esq., Director. Mr. Kunkel is 53 years of age. He graduated with a Juris Doctor degree from the University of Southern California in 1973. From 1973 to 1978, he practiced law with the firm of Karns & Karabian in Los Angeles, California. From 1978 to the present, he has practiced educational law, real estate law and general business law in his own firm. Mr. Kunkel is a member of the State Bar of California, the Los Angeles County Bar Association and the National School Board Attorneys' Association. He has also been a licensed real estate broker since 1979. Craig Morrison, M.D., Advisory Board Member, is 58 years of age, and practices at the Brigham Young Student Health Center. He has been an attending and consulting staff general surgeon since 1978 at the following hospitals: Utah Valley Regional Medical Center, Orem Community Hospital, Colombia Mountain View Hospital and Central Valley Hospital. Dr. Morrison received his Doctor of Medicine Degree from the University of Oregon Medical School in 1970, followed by a pediatric internship and surgical residency at the University of Southern California-Los Angeles County Hospital and the Huntington Memorial Hospital in 1975. 15 William Regelson, M.D., Advisory Board Member, is 75 years of age, an active Professor of Medicine at the Virginia Commonwealth University, College of Medicine since 1967, and a leading researcher in the field of aging. Dr. Regelson received his Doctor of Medicine Degree from the New York State University College of Medicine in 1952. He is particularly suited to positions of research and discovery having authored or co-authored over 200 papers on numerous medical subjects. Dr. Regelson's studies are at the forefront of current aging research. He has written or edited many books and texts that are available currently in the published market, focusing his research on the causes of the decline of the human body. Some of Dr. Regelson's publications are the following: "Dehydroepiandrosterone, 1999"; "The Superhormone Promise: Nature's Antidote to Aging. 1997"; "The Melatonin Miracle: Nature's Age- Reversing, Disease-Fighting, Sex-Enhancing, 1995"; and "Intervention in the Aging Process: Proceedings of the International Symposium on Intervention in the Aging Process, Boston, Mass, Nov 5-6, 1982." Leon Cass Terry, M.D., Ph.D., Advisory Board Member, is 59 years of age, and joined the Medical College of Wisconsin as a Professor of Neurology and Professor of Physiology in 1989; he is currently teaching, in addition to his practice at the University Medical Center. Focusing on his professorial duties, Dr. Terry recently stepped down from his position as the Chairman of Neurology, which he held from June of 1989 to May, 2000. During his tenure, Dr. Terry was the Associate Dean for Ambulatory Care from January, 1997 to March, 1998, and was the Chief of Staff from January, 1997 to January, 1999. He also held previous teaching and professional positions as a Research Scientist for the University of Michigan, Institute of Gerontology; Professor of Neurology and Associate Professor of Physiology and Neurology at the University of Michigan; and Associate Professor of Neurology at the University of Tennessee Center for Health Sciences. Dr. Terry earned his Doctorate of Pharmacology from the University of Michigan, his Doctor of Medicine from Marquette University Medical School, his Ph.D. in Experimental Medicine from McGill University Medical School and his Master of Business Administration from the University of South Florida. Dr. Terry has authored over 100 peer- reviewed articles, abstracts and book chapters in well known and respected publications. He was also principal or co-investigator on over 30 grants from the National Institute of Health, various pharmaceutical companies, philanthropic donations and others. He has also conducted clinical trials in various neurologic disorders. Herbert J. Meiselman, Sc.D., Advisory Board Member, is 60 years of age. He is an active Professor and Vice Chairman of the University of Southern California School of Medicine, Department of Physiology and Biophysics. Professor Meiselman graduated from Michigan Technical University with a BS degree in 1962. He received a Sc.D. degree from the Massachusetts Institute of Technology in 1965. As a Research Fellow at the California Institute of Technology, he studied in-vivo microcirculatory blood flow from 1966 to 1968. In 1968, he expanded his research studies to include in-vivo blood rheology, a program jointly administered by the California Institute of Technology and the University of Southern California Medical School. Since 1972, Dr. Meiselman's research at the University of Southern California has been concentrated in the areas of blood rheology and the physical behavior of red blood cells and white blood cells. He has authored or co-authored over 300 papers on numerous blood-related topics. 16 Significant Employees. - ---------------------- We do not currently have any employees who are not executive officers, but who are expected to make a significant contribution to our business. We do, however, have consulting agreements with technical experts. Family Relationships. - --------------------- There are no family relationships between any of our directors or executive officers. Involvement in Certain Legal Proceedings. - ----------------------------------------- During the past five years, none of our present or former directors, executive officers or persons nominated to become directors or executive officers: (1) was a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time; (2) was convicted in a criminal proceeding or named subject to a pending criminal proceeding, excluding traffic violations and other minor offenses; (3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or (4) was found by a court of competent jurisdiction in a civil action, the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- The following tables set forth the share holdings of our directors and executive officers and those persons who own more than five percent of our common stock as of the date of the prospectus: DIRECTORS AND EXECUTIVE OFFICERS --------------------------------
Number of Shares Percent Name and Address Beneficially Owned of Class* - ---------------- ------------------ -------- Thomas C. Drees, Ph.D., MBA 10,389,133 32.3% 101 East Green Street, #11 Pasadena, California 91105 Anthony G. Hargreaves 1,770,642 5.5% 101 East Green Street, #11 Pasadena, California 91105 David E. Nelson, CPA 80,150 .2% 528 14th Avenue Salt Lake City, Utah 84103 Edward L. Kunkel, Esq. 60,000 .2% 16 N. Marengo Ave, #517 Pasadena, California 91103 __________ ______ All directors and officers as a group (four persons) 12,319,925 38.3%
17 FIVE PERCENT STOCKHOLDERS -------------------------
Number of Shares Percent Name and Address Beneficially Owned of Class* - ---------------- ------------------ -------- Thomas C. Drees, Ph.D., MBA 10,389,133 32.3% 101 East Green Street, #11 Pasadena, California 91105 Anthony G. Hargreaves 1,770,642 5.5% 101 East Green Street, #11 Pasadena, California 91105 ----------- ----- 12,159,775 37.8%
* Based upon 32,118,591 shares of outstanding common stock, and assumes that the following shares of common stock underlying options or agreements or the warrants are outstanding: an option granted to Mr. Hargreaves to acquire 470,642 shares without registration rights at a price of $0.1275 per share, exercisable until September 22, 2001; an option granted to Mr. Kunkel to acquire 10,000 shares without registration rights at an exercise price of the average low bid price per share as quoted on the OTC Bulletin Board of the NASD on June 1, 1994, exercisable until May 31, 2002; 1,799,567 shares underlying the warrants owned by the selling stockholders; and 1,000,000 shares to be issued to Thomas C. Drees, Ph.D., our President, to replace 1,000,000 shares of his personal stock holdings that were conveyed to Laidlaw Global Securities for consulting services on April 17, 2001. Changes in Control. - ------------------- To our knowledge, there are no present arrangements or pledges of our securities that may result in a change in control of our company. 18 DESCRIPTION OF SECURITIES ------------------------- Common Stock. - ------------- Our authorized capital stock consists of 100,000,000 shares of common stock, $0.001 par value per share. Our Articles of Incorporation authorize the Board of Directors to declare and pay dividends on our common stock out of funds legally available for the payment of dividends. The holders of our common stock are entitled at all stockholder meetings to one vote for each share of common stock held. Fully- paid common stock shall not be liable to any further call or assessment. Our common stock has no pre-emptive rights, and stockholders are not allowed to cumulate their votes by multiplying the number of shares owned by the number of directors being elected and casting all votes for one director. Our Articles of Incorporation and Bylaws do not contain any provision that would delay, defer or prevent a change in the control of our company. Warrants. - --------- On September 1, 2000, and effective as of August 29, 2000, we completed the offer and sale through Laidlaw Global Securities of 1,635,970 units at a price of $0.50 per unit (the "Laidlaw Private Offering"). We received aggregate proceeds of $817,985. Each unit consisted of two shares of our common stock and one redeemable warrant entitling the holder to purchase one share of our common stock at an exercise price equal to $.40 per share, subject to adjustment in certain circumstances. The warrants are exercisable at any time beginning on the date of issuance and ending four years later, subject to an effective registration statement covering the exercise having been filed with the Securities and Exchange Commission. Beginning one year after their issuance, the warrants are redeemable, in whole or in part, at our option, for $0.05 per warrant on not less than 30 days' prior written notice, at any time, provided that: the closing bid price of our common stock is at least 200% of the then current warrant exercise price and the public trading volume of our common stock is not less than 50,000 shares per day on each of the 20 consecutive trading days ending within 10 days from the date of the notice of redemption; and the shares underlying the warrants have been registered for public distribution under the Securities Act. We were required to file the registration statement, at our cost, within 30 days of the closing of the Laidlaw Private Offering or September 30, 2000 (October 2, 2000, because September 30, 2000 fell on a weekend), and to cause this registration statement to be declared effective within 150 days of closing. The warrant exercise price was to be reduced by $0.05 for each 30 day delay in the filing or effectiveness of the registration statement. Because we did not file this registration statement within 30 days of the closing, the warrant exercise price has now been reduced to $0.35 per share. Laidlaw received 163,597 warrants to acquire 163,597 units offered in the Laidlaw Private Offering in consideration of the sum of $163.59 and as additional consideration for its placement services. 327,194 shares of our common stock and warrants to acquire 163,597 shares of our common stock exercisable as outlined above were issued to Laidlaw in May, 2001. 19 Penny Stock. - ------------ Our common stock is "penny stock" as defined in Rule 3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks: with a price of less than five dollars per share; that are not traded on a "recognized" national exchange; whose prices are not quoted on the NASDAQ automated quotation system; or in issuers with net tangible assets less than $2,000,000, if the issuer has been in continuous operation for at least three years, or $5,000,000, if in continuous operation for less than three years, or with average revenues of less than $6,000,000 for the last three years. 20 Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and Exchange Commission require broker/dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before making any transaction in a penny stock for the investor's account. You are urged to obtain and read this disclosure carefully before purchasing any of our shares. Rule 15g-9 of the Securities and Exchange Commission requires broker/dealers in penny stocks to approve the account of any investor for transactions in these stocks before selling any penny stock to that investor. This procedure requires the broker/dealer to: get information about the investor's financial situation, investment experience and investment goals; reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor can evaluate the risks of penny stock transactions; provide the investor with a written statement setting forth the basis on which the broker/dealer made his or her determination; and receive a signed and dated copy of the statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment goals. Compliance with these requirements may make it harder for our selling stockholders and other stockholders to resell their shares. INTEREST OF NAMED EXPERTS AND COUNSEL ------------------------------------- We have included our consolidated financial statements as of December 31, 2000, in reliance on the report of Tanner + Company of Salt Lake City, Utah, independent certified public accountants. Schvaneveldt and Company, that was a sole proprietorship operated by Darrell T. Schvaneveldt, CPA, who died on September 8, 2000, audited our consolidated financial statements for the year ended December 31, 1999, and cumulative amounts from January 18, 1990 (date of commencement of development stage) through December 31, 1999, whose report was dated April 11, 2000. Neither Tanner + Company nor Schvaneveldt and Company or Mr. Schvaneveldt had any interest, direct or indirect, in our company. Leonard W. Burningham, Esq. and Branden T. Burningham, Esq., lawyers, of Salt Lake City, Utah, father and son, associates in the practice of law and co-counsel for our company are each stockholders of our company, respectively owning 132,000 and 50,000 of our shares of common stock. Messrs. Burningham and Burningham prepared the registration statement and this prospectus and will provide any legal opinions required with respect to any related matter. We have not hired any expert or counsel on a contingent basis. Except as 21 indicated above, no expert or counsel will receive a direct or indirect interest in our company, and no such person was a promoter, underwriter, voting trustee, director, officer or employee of our company. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES ----------- Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes a Nevada corporation to indemnify any director, officer, employee or corporate agent "who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation" due to his or her corporate role. Section 78.751(1) extends this protection "against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful." Section 78.751(2) of the NRS also authorizes indemnification of the reasonable defense or settlement expenses of a corporate director, officer, employee or agent who is sued, or is threatened with a suit, by or in the right of the corporation. The party must have been acting in good faith and with the reasonable belief that his or her actions were not opposed to the corporation's best interests. Unless a court rules that the party is reasonably entitled to indemnification, the party seeking indemnification must not have been found liable to the corporation. To the extent that a corporate director, officer, employee or agent is successful on the merits or otherwise in defending any action or proceeding referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS requires that he or she be indemnified "against expenses, including attorneys' fees, actually and reasonably incurred by him or her in connection with the defense." Section 78.751(4) of the NRS limits indemnification under Sections 78.751(1) and 78.751(2) to situations in which either (1) the stockholders, (2)the majority of a disinterested quorum of directors, or (3) independent legal counsel determine that indemnification is proper under the circumstances. Pursuant to Section 78.751(5) of the NRS, the corporation may advance an officer's or director's expenses incurred in defending any action or proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides that the rights to indemnification and advancement of expenses shall not be deemed exclusive of any other rights under any bylaw, agreement, stockholder vote or vote of disinterested directors. Section 78.751(6)(b) extends the rights to indemnification and advancement of expenses to former directors, officers, employees and agents, as well as their heirs, executors and administrators. 22 Regardless of whether a director, officer, employee or agent has the right to indemnity, Section 78.752 allows the corporation to purchase and maintain insurance on his or her behalf against liability resulting from his or her corporate role. Article V of our Bylaws requires us to indemnify our directors and executive officers, former directors and executive officers and directors and executive officers of subsidiaries against expenses necessarily incurred by them in defending any action in which they are made parties due to their service as directors or executive officers, except in relation to matters as to which such directors or executive officers are adjudged to be liable for negligence or misconduct. Insofar as indemnification for liabilities arising under the Securities Act or the Exchange Act may be permitted to our directors, executive officers and controlling persons the foregoing provisions or otherwise, we have been advised that it is the opinion of the Securities and Exchange Commission that indemnification is against public policy as expressed in the Securities Act or the Exchange Act, and is therefore unenforceable. If a claim for indemnification against these liabilities, other than our payment of expenses incurred or paid by any of our directors, executive officers or controlling persons in the successful defense of any action, suit or proceeding is asserted by the director, executive officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question whether indemnification by us is against public policy as expressed in the Securities Act or the Exchange Act and will be governed by the final adjudication of that issue. DESCRIPTION OF BUSINESS ----------------------- Business Development. - --------------------- We were organized under the laws of the State of Utah on January 24, 1974, under the name "Sight and Sound Systems, Inc." We had an initial authorized capital of $50,000 comprised of 5,000,000 shares of $0.001 par value common stock. We commenced a public offering of our common stock on March 7, 1974. The offering was completed in June, 1974. We changed our name to "Kricket Corporation" on July 8, 1974. On April 9, 1976, we increased our authorized capital to $250,000, comprised of 25,000,000 shares of $0.01 par value per share common stock. On December 5, 1977, we changed our name to "International Health Resorts, Inc." 23 We organized a wholly-owned subsidiary under the laws of the State of Nevada, and on May 11, 1992, we merged into this subsidiary to change our domicile from the State of Utah to the State of Nevada. As a part of this merger, our authorized capital was reduced to $100,000, comprised of 100,000,000 shares of $0.001 par value common stock, and we effected a one for 20 reverse split of our outstanding shares of common stock. On June 14, 1993, we entered into an Agreement and Plan of Reorganization under which we acquired 94% of the outstanding shares of Sanguine California in exchange for shares of our common stock. We effected a 1.5 for one forward split of our outstanding securities and changed our name to "Sanguine Corporation" on June 25, 1993. We again increased our authorized capital on December 22, 1996, to $1,000,000, comprised of 100,000,000 shares of $0.01 par value common stock. On June 8, 2000, we executed and delivered a Warrant Agreement under which we granted Westbury Consultancy Services Limited warrants to acquire 12,000,000 shares of our common stock at an exercise price of $0.30 per share, exercisable until March 20, 2005, in exchange for consulting services. On September 1, 2000, we completed the Laidlaw Private Offering of 1,635,970 units at $0.50 per unit, for aggregate proceeds of $817,985. Each unit consisted of two shares of our common stock and one redeemable warrant entitling the holder to purchase one share of our common stock at an exercise price of $.40 per share. On November 10, 2000, our Board of Directors adopted the Warrant Agreement and negotiated a reduction in the term of the warrants from March 20, 2005, to one year from the effective date of this registration statement. In consideration of Westbury's assent to this reduction in the warrant term, the exercise price of the warrants was reduced from $0.30 per share to $0.25 per share. A significant expense of approximately $4,500,000 related to the grant of these warrants will be recorded in the fourth quarter which is when the grant was approved by the Board of Directors. This Warrant Agreement was mutually canceled on March 1, 2001, due to Westbury's inability to pursue a relationship based upon the consideration for research and development, without any warrants having been exercised. On January 19, 2001, we executed a Service Agreement with Irisys Research and Development LLC under which IriSys will provide Sanguine with expertise in preformulation development, analytical chemistry and stability protocol design and testing, including preparation of regulatory standards required to achieve regulatory compliance for our product, PHER-O2, a synthetic substitute for human red blood cells. On February 27, 2001, we executed a Consulting Agreement with National Financial Communications Corp. whereby NFC will provide us with public relations and communications services and advisory and consulting services for a period of one year commencing March 1, 2001. On April 17, 2001, Laidlaw Global Securities was conveyed 1,000,000 shares of our common stock by our President, Thomas C. Drees, Ph.D., for consulting and investment banking services for the coming year. We have agreed to return these securities to Dr. Drees, together with an additional 1% of this amount of shares for every month until the shares have been returned, which shall occur once $2,000,000 in debt or equity financing have been raised by us. 24 Business. - --------- We are engaged in the development of a synthetic red blood cell product called "PHER-O2." The development of this product presently comprises our sole business operations. PHER-O2 is composed of perfluoro-decalin molecules, or synthetic red blood cells, purified water and a proprietary, synthetic, fluorinated surfactant, or wetting agent, 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. We believe that PHER-O2 can carry three to four times the oxygen of human blood per unit volume. This increased oxygen-carrying capacity would make PHER-O2 useful in the treatment of heart attacks, strokes, cancer and other diseases for which increased oxygenation is beneficial. We also believe that perfluoro-decalin is effective as an imaging agent in X-ray imaging, nuclear magnetic resonance imaging and CAT scans, without side effects. Our management estimates that PHER-O2 has several other advantages over human blood: that it can be sterilized to be free of disease; that it has the quality of a universal match for all blood types; that it can be mass-produced; and that it can be stored much longer than human blood. We are concentrating our research and development efforts on completing the emulsion of perfluoro-decalin and the synthetic surfactants that make up PHER-O2. We anticipate that upon completion of the compounding of PHER-O2, we will perform initial gross animal tests, which do not require regulatory approval prior to commencement. However, regulatory agencies may review the data gathered from any of these tests. We plan to manufacture the experimental doses of PHER-O2 required to conduct these tests. Our first phase of development will involve: compounding PHER-O2; seeking regulatory approval for gross animal testing and conducting this testing; and the manufacturing of available product for this testing. In our second phase of operations, we intend to continue developing the perfluorocarbon compounds in PHER-O2 in order to optimize its quality. We expect to begin animal safety and efficacy trials in accordance with FDA guidelines and comparable foreign regulatory requirements. In our final phase, we intend to: complete United States testing of PHER-O2; seek all necessary FDA approvals and begin American and Canadian sales for cancer treatment and angioplasty; and complete overseas testing, begin overseas sales and begin the construction of manufacturing facilities. In our final phase, we also intend to continue trials to test PHER-O2 for other applications, including transplant organ preservation and treatment of carbon monoxide poisoning, sickle cell anemia, heart attack and stroke. We will have to conduct similar rigorous testing and clinical trials of PHER-O2 for each desired application. 25 PHER-O2 is still in the research and development stage. It has not been tested on animals or humans; nor have we submitted any application to any federal, state or foreign agency to seek authority for such testing. The development process will be time consuming and expensive. It will also be subject to extreme governmental regulation. We will have to prove that our product is safe and efficacious for human use. Until then, we will have no potential for revenues from operations. We can not assure you that we may be able to raise the money necessary to develop PHER-O2 or that, if we raise sufficient funds, that we may ever receive the necessary federal, state or foreign agency approval to manufacture or market the product. Principal Products or Services and their Markets. - ------------------------------------------------- We have only one product, PHER-O2, which is still in the research and development stage. Our success hinges solely on the success of this product. We can not assure you that it will ever be successful. PHER-O2 is made up of perfluoro-decalin, which is a type of perfluorocarbon that is harmless to humans and the atmosphere, purified water and a proprietary surfactant to hold the emulsion together. Perfluoro-decalin gives the product its oxygen carrying ability. The surfactant is non-toxic and, being fluorinated, helps increase PHER-O2's oxygen carrying capacity and emulsion stability. We believe that the unique chemical nature of PHER-O2 will make it ideal for many medical applications, although each application will be subject to the same types of rigorous testing, clinical trials and governmental regulatory approval process. We believe that PHER-O2 has the following advantages over human blood: may carry three to four times the oxygen of human blood per unit volume; free of HIV, hepatitis and other blood-borne disease; universal match for all blood types; may be mass-produced; may have a three-year shelf life; may be stored at room temperature; has controllable circulatory half-life; and may be 1/25th the size of a red blood cell. PHER-O2 is a second generation drug from Fluosol-DA, the only synthetic red blood cell approved by the FDA. This process was completed under the management of our President and CEO, Thomas C. Drees, Ph.D. 26 We believe that its unique qualities may make PHER-O2 ideal for blood transfusions and numerous other medical applications, including: nuclear magnetic resonance imaging; CAT scans; cardioplegia, or the priming of heart-lung machines in open heart surgery; and treatment of heart attacks, strokes, head and neck tumors and hemorrhagic shock. We intend to fully exploit the immense worldwide market for these applications. Blood transfusion represents a vast market for synthetic red blood cells. The limited supply of safe donated blood is the largest constraint on the number of transfusions given annually. If a safe blood substitute were widely available, more transfusions could be given to those who desperately need them. We hope to fulfill this need with PHER-O2. The key ingredients in PHER-O2 are readily available in the United States from many manufacturers. When combined, using our proprietary emulsion process, we hope that the result will be a plentiful alternative to donated human blood. Another disadvantage to the use of human blood in transfusions is the waiting period while the donor's blood is being matched to the recipient's. Because we believe that PHER-O2 does not need to be matched to the recipient's blood type, the use of PHER-O2 would eliminate this potentially fatal wait, and increase its use in ambulances. As HIV, hepatitis, CJD and other diseases have infected the world's blood supply, the need for an absolutely sterile blood product has become increasingly apparent. There is currently no 100% effective method for detecting blood-borne diseases and sterilization of donated blood is not possible. In light of these facts, PHER-O2's potential sterility makes it especially attractive in comparison to donated blood with its risk of AIDS, hepatitis and mad cow disease. PHER-O2's anticipated ability to carry up to four times the oxygen of human blood makes it promising for many medical applications in which increased oxygenation is vital. PHER-O2 molecules are up to 25 times smaller than human red blood cells. Management believes that this fact will make PHER-O2 particularly useful for oxygenating organs through blocked arteries, which are the primary cause of heart attack and stroke. One of our competitors had obtained FDA approval under Dr Drees' management for the use of a similar product in angioplasty, the treatment of blocked arteries with small inflated balloons. This application involves the injection of the blood substitute into the artery past the inflated balloon. As a result, the heart receives more oxygen, the treating physician can keep the balloon inflated longer and the angioplasty is more effective than it would otherwise be. This competitor has announced that it will no longer manufacture its product, leaving us well positioned in this market segment. 27 Management also believes that PHER-O2 will be ideal for use in open-heart surgery. Cardiac surgeons need an oxygen-carrying fluid that can be used to prime the heart-lung bypass machines that are used mechanically to pump and oxygenate heart patients' blood. This procedure is known as "cardioplegia." Surgeons currently use saline, dextrose or hydroxyethyl starch solutions for this purpose, but these fluids can dilute the red blood cells in the body, and thus decrease the ability of the blood to carry oxygen. Moreover, the risk of infection from whole blood or its derivatives makes them undesirable for use as priming fluids. PHER-O2's significant oxygen-carrying ability and its sterility address both of these concerns. The treatment of head and neck tumors is another promising application for PHER-O2. Increased oxygenation of these tumors makes them more susceptible to the effects of radiation and chemotherapeutic drugs. Another potential benefit of PHER-O2, though little understood, is the ability of oxygen-rich blood to cause a tumor to produce hydrogen peroxide, which in turn tends to shrink the tumor. The perfluoro-decalin molecule in PHER-O2 also works as a radiopaque agent in X-ray imaging and as a contrast agent in nuclear magnetic resonance imaging and CAT scans. However, unlike many currently-available imaging agents, PHER-O2 has no known side effects. Competition. - ------------ Ten years ago there were 15 possible competitors. Three companies are still working to develop alternatives to human blood. They include: Alliance Pharmaceutical Corporation of San Diego, California, (PFC); Biopure Corporation of Cambridge, Massachusetts, (cows blood); and Northfield Laboratories, Inc. of Evanston, Illinois, (outdated human blood). Each of these competitors files reports with the Securities and Exchange Commission and these reports are available for review in the Securities and Exchange Commission's EDGAR Archives. These competitors are involved in the development of a wide variety of human blood substitutes, including synthetic compounds, recycled outdated human blood and bovine hemoglobin. Neither the list of competitors nor the list of human blood substitutes is exhaustive. Furthermore, some of our existing or potential competitors have significantly greater technical and financial resources than we do and may be better able to develop, test, produce and market products. These competitors may develop products that are competitive with or better than our product and that may render our product obsolete. We can provide no assurance that we will be able to compete successfully. 28 Sources and Availability of Raw Materials. - ------------------------------------------ We plan to purchase highly purified medical-grade perfluorocarbons and surfactants from reliable vendors and to emulsify these ingredients in our own facilities, depending upon funding. FluoroMed, LP, PCR, Inc. and F2 Chemicals, Ltd. are qualified medical grade perfluorocarbon vendors. Surfactants are available through several vendors. Because intravenous solutions manufacturing plants are very expensive and FDA approval of these plants is a lengthy process, we intend to hire a third party to package the product in sterile plastic bags with intravenous sets attached. Abbott Laboratories, Baxter, McGaw and Fresenius Kabi are a few of the companies with the qualifications and capacity to perform this function. However, we can not assure you that any of these ingredients or services will be available or that they will be available at prices that are low enough to make our operations profitable. Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts. - ---------------- We filed United States Application Patent No. 07/952/403, covering PHER- O2, with the United States Patent Office on September 28, 1992. No patent has been issued, and we may have to amend our patent application before any patent is issued, if ever. We filed European Application Patent No. (UK)EPO261802, covering PHER-O2, with the European Patent Office on August 25, 1997. No patent has been issued and, and we may have to amend our patent application before any patent is issued, if ever. We have formulated certain proprietary surfactants during the course of our research and development activities. The surfactant is mixed with the basic chemical of our product, perfluorodecalin, to maintain the small particle size in the emulsion of PHER-O2 because the particle size of decalin alone and unemulsified in the blood stream may quickly increase in size and block arteries and veins. There is a dispute over the ownership of certain of these inventions with Battelle Memorial Institute, the firm that we previously engaged to conduct research and development for us on PHER-O2. We intend to pursue our rights to all of these inventions. We hold clear title to those that we are presently continuing our development; those to which Battelle claims an interest in, we are not presently engaged in any development. Governmental Approval of Principal Products or Services. - -------------------------------------------------------- The FDA and comparable foreign agencies require laboratory testing, animal and human clinical testing and other costly and time-consuming procedures before biomedical products such as PHER-O2 can be marketed. To date, we have not begun any of these procedures. Our plan for obtaining FDA and overseas approval of PHER-O2 is set forth under the heading "Plan of Operation" of the caption "Management's Discussion and Analysis or Plan of Operation" commencing on page 33. We can not assure you that these testing procedures may be successfully completed, that if completed, they may show PHER-O2 to be safe and efficacious, or that we will obtain any required governmental approvals. Nor can we assure you that we may ever be permitted to market PHER-O2 in the United States or most foreign countries. The same holds true for any other related products or proprietary rights that we may develop. 29 Effects of Existing or Probable Governmental Regulations. - --------------------------------------------------------- Regulation by governmental authorities in the United States and foreign countries will significantly affect our ability to manufacture and market our product and to conduct our ongoing research and product development activities. Our only product, PHER-O2, will require regulatory approval by appropriate governmental agencies before it can be commercialized. Human therapeutic products are subject to rigorous pre-clinical and clinical testing and other approval procedures by the FDA and similar health authorities in foreign countries. Various federal, state and foreign statutes also govern or influence the manufacturing, safety, labeling, storage, record-keeping and marketing of such products. The process of obtaining these approvals is costly and time consuming. In addition, ongoing compliance with these requirements may require the expenditure of substantial resources. If we or our collaborators or licensees fail to obtain or experience delay in obtaining required regulatory approvals the marketing of our product and our ability to derive product or royalty revenue may be severely limited. Pre-clinical testing is generally conducted in animal or in vitro models to evaluate the potential efficacy and safety of a compound before it is administered to humans. The results of these studies are submitted to the FDA as part of an Investigational New Drug application ("New Drug Application"), which must be approved before human clinical testing can begin. No tests of any nature whatsoever have yet been run on PHER-O2. Human clinical trials involve the administration of the investigational new drug to healthy volunteers or to patients, under the supervision of a qualified principal investigator. Clinical trials are conducted in accordance with certain standards under protocols that detail the objectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the New Drug Application. Further, each clinical study must be conducted under the auspices of an independent investigational board at the institution where the study will be conducted. Consideration will be given to ethical factors, the safety of human subjects and the possible liability of the institution, among other things. Clinical trials are typically conducted in three sequential phases, but the phases may overlap. In the first phase, the product is usually infused into a limited number of human subjects and will be tested for safety or adverse effects, dosage tolerance and pharmacokinetics, or clinical pharmacology. The second phase involves studies in a somewhat larger patient population to identify possible adverse effects and safety risks and to begin gathering preliminary efficacy data. The third phase of trials is designed to further evaluate clinical efficacy and to further test for safety within an expanded patient population at geographically dispersed clinical study sites. Although we believe that our product is substantially different from other synthetic blood products, we may encounter problems in clinical trials which will cause us to delay or suspend them. 30 In the case of biologic products such as PHER-O2, the results of pharmaceutical development and the pre-clinical and clinical testing are submitted to the FDA in the form of a Product License Application. This application must be approved before commercial sales may begin. We must also file an Establishment License Application, which describes the manufacturing process for the product and the facility at which the product will be produced. The FDA may respond to the filings by granting a license for the manufacture of the product from a designated facility and the commercial sale of the product. It may also deny the applications if it finds that the applications do not meet the criteria for regulatory approval, require additional testing or information or require post-marketing testing and surveillance to monitor the safety of the product if it does not believe that the applications contains adequate evidence of the safety and efficacy of the drug. Despite the submission of this data, the FDA may ultimately decide that the application may not satisfy its regulatory criteria for approval. The testing and approval process is likely to require substantial time and effort. We can not guarantee that approval may be granted for our product or our proposed facilities on a timely basis, if at all. In addition to regulations enforced by the FDA, we may also be subject to regulation under the Occupational Safety and Health Act; the Environmental Protection Act; the Toxic Substances Control Act; the Resource Conservation and Recovery Act; the Comprehensive Environmental Response, Compensation and Liability Act; the National Environmental Policy Act; the Clean Air Act; the Medical Waste Tracking Act; the federal Water Pollution Control Act; and other present and potential federal, state, local and foreign regulations. Cost and Effect of Compliance with Environmental Laws. - ------------------------------------------------------ Management believes that all of the substances making up PHER-O2 are inert and non-toxic and that no toxic or hazardous materials will be byproducts of the manufacturing process of PHER-O2. PHER-O2 is totally inert. Accordingly, we do not believe that we will have any material expenditures for compliance with environmental laws, rules or regulations. Research and Development Expenses. - ---------------------------------- During years ended December 31, 1999 and 2000, we expended a total of approximately $145,485 on research and development, $78,000 in 1999 and $67,485 in 2000. None of these costs were borne by customers or others. Number of Employees. - -------------------- We presently have three employees, our Chairman, President and CEO, Thomas C. Drees, Ph.D.; our Chief Financial Officer, David E. Nelson; and our Vice Chairman and Secretary/Treasurer, Anthony G. Hargreaves. Dr. Drees and Mr. Hargreaves are employed full time. If we are able to complete the development of PHER-O2 and commence initial animal testing and manufacturing of this product for these tests, we will need additional employees. We are presently unable to estimate the exact number of employees that we may need for these services. Reports to Security Holders. - ---------------------------- The NASD requires that all issuers maintaining quotations of their securities on the OTC Bulletin Board file periodic reports under the Exchange Act, and we do file periodic reports with the Securities and Exchange Commission under Section 13 of the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the 31 operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains an Internet site, the "EDGAR Archives," that contains reports, proxy and information statements and other information about issuers that file electronically with the Securities and Exchange Commission. The address of that site is www.sec.gov. We intend to furnish to our stockholders annual reports containing financial statements audited and reported upon by our independent accounting firm and other periodic reports as we may determine to be appropriate or as may be required by law. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION --------------------------------------------------------- Plan of Operation. - ------------------ We have not commenced planned principal operations, but have made progress since the end of fiscal 1998. Our proposed plan of operation is composed of three "phases," each of which coincides with a specific milestone in the process of developing PHER- O2. Each of these phases will begin subject to available funding. Each phase, and the projected cost of each, is as follows: Phase I (approximately one year): In the first six months, we plan to complete the development of perfluoro-decalin and the synthetic surfactants that make up PHER-O2, manufacture experimental doses and perform preliminary animal tests in accordance with FDA and overseas regulations. In the second six months, we intend to continue developing the perfluorocarbon compounds in PHER-O2 in order to produce optimal qualities and to conduct animal safety and efficacy trials in accordance with FDA and overseas requirements. During the course of Phase I, we estimate that our increased technical, administrative, sales/marketing and manufacturing requirements will require us to the hire a few additional employees. Estimated cost is $1,500,000, divided as follows: Completing the surfactant formulation and the manufacture of sufficient product for initial testing, $500,000; animal safety and efficacy trials through a sub- contractor, $600,000; and administrative, patent and proprietary right protection and marketing costs, $400,000. Phase II (approximately one year): In the second year, we intend to prepare New Drug Applications for FDA and European approval, conduct trials for cardioplegia, cancer treatment and cardiology treatment in the United States and conduct transfusion trials offshore. During this period, we also plan to submit license applications for transfusion with overseas authorities, begin production of PHER-O2 itself or with our subcontractors and submit a New Drug Application for PHER-O2 in the United States. During the course of Phase II, we estimate that we will need to hire a few additional employees. Estimated cost is $3,500,000, divided as 32 follows: Prepare and file United States and European New Drug Applications, $300,000; conduct human safety and efficacy trials through a subcontractor in the United States and overseas, $2,000,000; set-up pilot facility, or subcontract, to manufacture small quantities of PHER-O2 for use in testing and in connection with the New Drug Applications, $500,000; submit license applications for use of PHER-O2 in transfusions overseas, $200,000; and administrative, patent and proprietary right protection and marketing costs, $500,000. Phase III (approximately one year): In the third year, we plan to complete overseas testing of PHER-O2, begin sales in Europe and other overseas areas that may have approved PHER-O2 by this time and may begin construction of facility for manufacturing, storing, inspecting and shipping PHER-O2. During the course of Phase III, we estimate that we will need to hire additional employees. During the third year, we plan to complete testing of PHER-O2 in the United States and receive all necessary FDA approvals and begin American and Canadian sales for cancer treatment and angioplasty. During this period, we also plan to complete construction of our manufacturing facility, unless we determine to subcontract this process, and continue trials of other PHER-O2 applications, including transplant organ preservation and treatment of carbon monoxide poisoning, sickle cell anemia, stroke and heart attack. The estimated cost for Phase III is $15,000,000, divided as follows: Complete human safety and efficacy clinical trials and obtain United States and overseas agency approval of PHER-O2, $9,000,000; construct manufacturing facility or subcontract with major emulsifying firm, $3,000,000; recruit and train sales force of the United States and foreign markets, $1,500,000; and administrative, patent and proprietary right protection and marketing costs, $1,500,000. These cost estimates are based upon the prior experience of Thomas C. Drees, Ph.D., our President and CEO. Dr. Drees has more than 25 years' experience in the blood industry. Our plan of operation for the next 12 months is to: begin Phase I and to complete the synthesis of the PHER-O2 surfactant and its emulsion with perfluoro-decalin; manufacture experimental doses of PHER-O2; and perform preliminary animal tests in accordance with FDA and comparable foreign overseas regulations. 33 Our ability to begin and to carry out our plan depends entirely upon our ability to obtain substantial equity or debt financing. We can not assure you that we will receive this financing. If we do not receive it, we will not be able to proceed with our business plans. Results of Operations. - ---------------------- During the quarterly period ending March 31, 2001, the Company's only business operations were those of Sanguine California. During this period, the Company received total revenues of $0 and sustained a net loss of ($185,044). Revenues for the calendar years ending December 31, 2000 and 1999 were $0 and $0, respectively. We had no material operations, except the limited research and development activities related to our subcontracted research and development of our product. We realized a net loss of ($1,444,616), with a loss of ($.06) per share during the calendar year ended December 31, 2000, and a net loss from operations of $(217,864), with a loss of $(0.01) per share for the year ending December 31, 1999. Our research and development expenses were $67,485 in 2000, compared to $78,000 in 1999; the difference between these expenditures is $10,515 between 2000 and 1999. Liquidity. - ---------- During the quarterly period ended March 31, 2001, the Company had total expenses of $185,044, while receiving $0 in revenues; compared to the period ended March 31, 2000, the Company had total expenses of $356,260, while receiving $0 in revenues. As of March 31, 2001, the Company had $397,743 in cash, with $1,753,136 in current liabilities. As of December 31, 2000, we had $531,952 in cash, with $1,721,052 in current liabilities. We received $91,500 on August 3, 2000, in exchange for a note payable to the President of the Company; and an additional $691,506 net proceeds from the Laidlaw Private Offering, was received on September 1, 2000. During the calendar year ended December 31, 2000, we had net expenses of $1,444,616, while receiving $0 in revenues. We received no revenues, and had total expenses of $217,864 during the calendar year ended December 31, 1999. The amount of research and development in 1999 exceeded these expenses in 2000 by $10,515. Cash resources at December 31, 2000 and 1999 were $531,952 and $1,062, respectively. Liquidity was provided through the sale of our common stock in 2000 and 1999 of $715,406 and $9,500, respectively. 34 DESCRIPTION OF PROPERTY ----------------------- We lease approximately 970 square feet of office space located at 101 East Green Street, Suite 11, Pasadena California, 91105, at a base rent of $1,695.75 per month. The lease runs through April 30, 2001. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- Transactions with Management and Others. - ---------------------------------------- Except as outlined under the caption "Executive Compensation" commencing on page 37, during the past two years, there have been no material transactions, series of similar transactions or currently proposed transactions, to which our company or any of our subsidiaries was or is to be a party, in which the amount involved exceeded $60,000 and in which any director or executive officer, or any security holder who is known to us to own of record or beneficially more than five percent of our common stock, or any member of the immediate family of any of the foregoing persons, or any promoter or founder had a material interest. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS -------------------------------------------------------- Market Information. - ------------------- Until the quarter ended June 30, 1994, and for at least five years previously, there had been no "public market" for our shares of common stock. Our common stock began to trade on the OTC Bulletin Board of the NASD in the second quarter of 1994 under the symbol "SGNC." The range of high and low bid quotations for our common stock during the each quarter of the year ended December 31, 1998, each quarter of the calendar year ended December 31, 1999, and the first three quarters of 2000, is shown below. Prices are inter-dealer quotations as reported by the NASD and do not necessarily reflect transactions, retail markups, mark downs or commissions.
STOCK QUOTATIONS BID Quarter or period ended: High Low - ------------------------ ---- --- March 31, 1998 $0.5312 $0.125 June 30, 1998 $1.0937 $0.25 September 30, 1998 $0.75 $0.1562 35 December 31, 1998 $0.3437 $0.1562 March 31, 1999 $0.16 $0.10 June 30, 1999 $0.11 $0.08 September 30, 1999 $0.09 $0.07 December 31, 1999 $0.50 $0.09 March 31, 2000 $1.90625 $0.23 June 30, 2000 $1.50 $0.625 September 30, 2000 $0.8125 $0.3125 December 31, 2000 $0.22 $0.665 March 31, 2001 $0.32 $0.1875 May 31, 2001 $0.27 $0.17
Resales of Restricted Securities. - --------------------------------- Approximately 12,187,613 shares of our common stock are publicly traded. This number will be increased by the 3,453,134 presently outstanding shares that may be offered by and have not been presently sold under this prospectus, along with the 1,799,567 shares underlying the warrants that also may be offered by this prospectus. Furthermore, most shares that are owned by members of management have been held for a sufficient period of time that they may sell the allowed percentage of these shares under Rule 144 of the Securities and Exchange Commission. These shares of our common stock will substantially increase the number of shares that may be available for public trading. The sale of these shares in the public market may reduce the price of our common stock. Holders. - -------- As of the date of this prospectus, we have about 512 stockholders. This figure does not include an indeterminate number of stockholders who may hold their shares in "street name." Dividends. - ---------- We have not declared any cash dividends on our common stock, and do not intend to declare dividends in the foreseeable future. Management intends to use all available funds for the development of Sanguine's business. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock. 36 EXECUTIVE COMPENSATION Cash Compensation. - ------------------ The following table shows the aggregate compensation that we have paid to directors and executive officers for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Awards Payouts (a) (b) (c) (d) (e) (f) (g) (h) (i) Secur- ities All Name and Year or Other Rest- Under- LTIP Other Principal Period Salary Bonus Annual rictedlying Pay- Comp- Position Ended ($) ($) Compen-Stock Optionsouts ensat'n - ----------------------------------------------------------------- Thomas C. Drees, Ph.D, CEO 03/31/01 * 0 0 0 0 0 0 President 12/31/00 * 0 0 0 0 0 0 and Chairman12/31/99 * 0 0 0 0 0 0 of the Board Anthony G. 03/31/01 18000 0 0 0 0 0 0 Hargreaves, 12/31/00 24000 0 0 300000 0 0 0 Vice Pres., 12/31/99 * 0 0 0 0 0 0 Sec./Tres. and Director David E. 03/31/01 0 0 0 0 0 0 0 Nelson, CPA 12/31/00 0 0 0 100000 0 0 0 CFO and 12/31/99 0 0 0 0 0 0 0 Director Edward L. 03/31/01 0 0 0 0 0 0 0 Kunkel, Esq.12/31/00 0 0 0 0 0 0 0 Director 12/31/99 0 0 0 0 0 0 0 Merton Dick 03/31/01 0 0 0 25000 0 0 0 Van Orden, 12/31/00 0 0 0 25000 0 0 0 Director * See the heading "Employment Contracts and Termination of Employment and Change-in-Control Arrangements" below.
Compensation Pursuant to Plans. - ------------------------------- We have no incentive or bonus plans. 37 Pension Table. - -------------- We have no pension plans. Other Compensation. - ------------------- Other than as discussed below, we have no other compensation arrangements with any of our directors or executive officers or Advisory Board members. Compensation of Directors. - -------------------------- Effective June 15, 1994, our Board of Directors adopted resolutions providing for us to pay our directors $500 per month. At the option of each director, we may pay the fee in "unregistered" and "restricted" shares of our common stock. Directors shall also be reimbursed for direct out-of-pocket expenses for attendance at Board meetings and for expenses incurred on our behalf. Due to lack of funding, we have not made any payments pursuant to these resolutions. We will not make any payments to our directors until we have received substantial additional funding for our operations. We can not guarantee that we will ever receive this funding. Effective October 1, 2000, Merton Dick Van Orden will receive 25,000 "unregistered" and "restricted" shares of our common stock per quarter, and Messrs. Morrison, Meiselman, Regelsen and Terry will receive 12,500 unregistered" and "restricted" shares of our common stock per quarter, for service on the Medical Advisory and Applications Board of Directors. For services rendered prior to their designation to the Advisory Board, Mr. Van Orden will be issued an additional 25,000 shares; Messrs. Morrison, Meiselman and Terry will each receive an additional 12,500 shares; and Dr. Regelsen will receive an additional 37,500 shares. Mr. Van Orden resigned, effective April, 2001. Employment Contracts. - --------------------- On September 23, 1993, our Board of Directors entered into Employment Agreements with Dr. Drees and Mr. Hargreaves for a seven-year period beginning on August 1, 1993. These Employment Agreements have been extended through January 22, 2004. The Employment Agreements call for a base salary of $120,000 to Dr. Drees and $72,000 to Mr. Hargreaves annually. We are to provide insurance benefits, home office reimbursement and an automobile and to reimburse Dr. Drees and Mr. Hargreaves for out of pocket expenses. On June 2, 1994, Dr. Drees and Mr. Hargreaves agreed to cancel all outstanding accruals for expenses under the Employment Agreements and to accept as full satisfaction of all of their claims against us the payments they received in November, 1993. In addition 38 the Employment Agreements were modified to provide that for June, July, and August of 1994, salary shall be paid at one fourth the amount specified by the Employment Agreements. Beginning September 1, 1994, Dr. Drees and Mr. Hargreaves were entitled to receive one-half the salary specified until we have raised $1,500,000 in debt or equity funding. All funds raised since the completion of our reorganization with Sanguine California are being counted in arriving at this sum. As of December 31, 1998, a total of $428,000 in salaries had accrued to Messrs. Drees and Hargreaves; as of December 31, 1999, a total of $524,000 in salaries had accrued; as of December 31, 2000, a total of $584,000 in salaries had accrued; and as of March 31, 2001, a total of $599,000 in salaries had accrued. On September 24, 1996, our Board of Directors resolved to issue to Mr. Hargreaves 529,358 "unregistered" and "restricted" shares in consideration of prior services rendered over the previous six years. On June 10, 2000, 300,000 shares were also issued to Mr. Hargreaves for additional services valued at $75,000. Sanguine and Edward L. Kunkel, Esq., who is one of our directors, executed an Employment Agreement on June 1, 1994. The Employment Agreement provided for Mr. Kunkel to receive $500 per month or $500 worth of our "unregistered" and "restricted" common stock, provided that no compensation was to be payable until we had received operating funds totaling at least $1,000,000 cash. We have been unable to get the funding and we have not yet paid this compensation. The Employment Agreement was for a one year term, subject to renewal by the parties. As of the date of this prospectus, we have not renewed the Employment Agreement. Mr. Kunkel's Employment Agreement irrevocably granted to Mr. Kunkel the option to purchase 10,000 "unregistered" and "restricted" shares of our common stock, exercisable in whole or in part until May 31, 1997. This date has been extended to May 31, 2002. The exercise price is the average low bid price per share as quoted on the OTC Bulletin Board of the NASD on June 1, 1994. As of the date of this prospectus, Mr. Kunkel had not exercised the option in whole or in part. Termination of Employment and Change of Control Arrangements. - ------------------------------------------------------------- We have no special arrangements involving any change of control of our company or termination of any director, executive officer or Advisory Board member. Compliance with Section 16(a) of the Exchange Act. - -------------------------------------------------- To our knowledge, during our past fiscal year and since then, all filings required to be made by members of management or others pursuant to Section 16(a) of the Exchange Act, have been duly filed. However, the following filings were filed later than their due dates: 39
Date Report Date Report Filer Transaction Due Filed - ----- ----------- --- ----- Thomas C. Drees Disposition of 6/10/00 10/3/00 Ph.D. 230,000 shares Conveyance of 4/27/01 6/14/01 1,000,000 shares Anthony G. Acquisition of Hargreaves 300,000 shares 6/10/00 10/3/00
FINANCIAL STATEMENTS -------------------- (i) Financial Statements for the years ended December 31, 2000, and December 31, 1999 Independent Auditors Report Balance Sheet - December 31, 2000 and 1999 Statements of Operations Accumulated for the Period January 18, 1989 to December 31, 2000 and the Years ended December 31, 2000, 1999 and 1998 Statements of Stockholders' Equity January 1, 1990 to December 31, 2000 Statements of Cash Flows Accumulated for the Period January 18, 1989 to December 31, 2000 and the Years Ended December 31, 2000, 1999 and 1998 Notes to Financial Statements (ii) Financial Statements Balance sheet, March 31, 2001 (unaudited) Statement of operations for the three months ended March 31, 2001 and 2000 (unaudited) and for the period from January 18, 1989 (date of inception) to March 31, 2001 (unaudited) Statement of cash flows for the three months ended March 31, 2001 and 2000 (unaudited) and for the period from January 18, 1989 (date of inception) to March 31, 2001 (unaudited) Notes to financial statements 40 SANGUINE CORP Consolidated Financial Statements December 31, 2000 and 1999 41 SANGUINE CORP Index to Consolidated Financial Statements Page Independent Auditors' Report F-2 Consolidated Balance Sheet F-4 Consolidated Statement of Operations F-5 Consolidated Statement of Stockholders' Deficit F-6 Consolidated Statement of Cash Flows F-8 Notes to Consolidated Financial Statements F-9 42 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Sanguine Corporation We have audited the accompanying consolidated balance sheet of Sanguine Corporation (a development stage company) as of December 31, 2000, and the related consolidated statements of operations, stockholders' deficit and cash flows for the year 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 audit. The consolidated financial statements of Sanguine Corporation at December 31, 1999 and for the year then ended and cumulative amounts from January 18, 1990 (date of commencement of development stage) through December 31, 1999, were audited by another auditor, now deceased, whose report dated April 11, 2000 expressed an unqualified opinion on those statements, with an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Sanguine Corporation as of December 31, 2000, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. 43 The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a deficit in working capital, a stockholders' deficit, has not generated significant revenues from operations, and has incurred significant losses since inception. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Salt Lake City, Utah March 8, 2001 44 SANGUINE CORPORATION (A Development Stage Company) Consolidated Balance Sheet December 31, - ----------------------------------------------------------------------------- Assets 2000 1999 Current assets - cash $531,952 $1,062 Property and equipment less accumulated depreciation of $4,609 for 2000 and 1999 - - $531,952 $1,062 Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $136,845 $78,680 Accrued salaries 584,000 524,000 Accrued interest payable 59,695 38,880 Other accrued expenses 2,369 - Notes payable 938,143 168,306 Total current liabilities 1,721,052 809,866 Commitments - - Stockholders' deficit: Common stock 100,000,000 shares authorized, $.001 par value; 28,111,188 and 23,162,994 shares issued and outstanding, respectively 28,111 23,163 Paid-in capital (quasi-reorganized March 20, 1994 deficit retained earning of $2,423,964 eliminated) 1,936,816 877,444 Deficit accumulated during the development stage (3,154,027) (1,709,411) Total stockholders' deficit (1,189,100) (808,804) Total liabilities and stockholders' deficit $531,952 $1,062
See accompanying notes to consolidated financial statements. 45 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Operations Years Ended December 31, and Cumulative Amounts Since January 18, 1990 (Date of Commencement of Development Stage) 2000 1999 Cumulative Amounts Revenue $ - $ - $ 150,000 Research and development (67,485) (78,000) (1,011,290) Consulting (369,000) - (666,520) General and administrative expenses (973,185) (123,118) (1,716,005) Loss from operations (1,409,670) (201,118) (3,243,815) Other income (expense): Interest income 9,780 - 14,622 Interest expense (44,726) (16,746) (131,299) Loss before benefit for income taxes (1,444,616) (217,864) (3,360,492) Benefit for income taxes - - - Net loss $(1,444,616) $(217,864) $(3,360,492) Loss per common share - basic and diluted $ (.06) $ (.01) Weighted average shares - basic and diluted 25,072,762 23,078,735
See accompanying notes to consolidated financial statements. 46 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Stockholders' Deficit Period January 18, 1990 (Date of Commencement of Development Stage) Through December 31, 2000
Deficit Accumulated Additional During the Common Stock Paid In Development Shares Amount Capital Stage Total Balance, January 1, 1990 Retroactively Restated 1,428,364 $ 1,428 $2,423,214 ($2,464,642) $ (40,000) Issuance of common stock for cash - - - - - Balance, December 31, 1990 1,428,364 1,428 2,423,214 (2,464,642) (40,000) Net Income 73,917 73,917 Balance, December 31, 1991 1,428,364 1,428 2,423,214 (2,390,725) 33,917 Common Stock Issued for Services ($0 Per Share) 2,720 2 - - 2 Contributed Capital by Officer - - 750 - 750 Net Loss - - - (77,011) (77,011) Balance, December 31, 1992 1,431,084 1,430 2,423,964 (2,467,736) (42,342) Common Stock Issued to Acquire 94% of Outstanding Shares of Sanguine Corporation (A California Corporation) 14,589,775 14,590 - (14,590) - Common Stock Issued for Cash ($.22 Per Share) 510,000 510 109,490 - 110,000 Net Loss - - - (92,895) (92,895) Balance, December 31, 1993 16,530,859 16,530 2,533,454 (2,575,221) (25,237) Quasi-Reorganization Restated of Equity Accounts - - (2,423,964) 2,423,964 - Common Stock issued for cash ($.39 Per Share) 191,000 191 74,809 - 75,000 Net Loss - - - (230,779) (230,779) Balance, December 31, 1994 16,721,859 16,721 184,299 (382,036) (181,016) Common Stock issued for: Debt and payables ($.11 per share) 1,216,000 1,216 128,048 - 129,264 Services ($.13 per share)1,625,000 1,625 201,500 - 203,125 Net Loss - - - (366,843) (366,843)
47 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Stockholders' Deficit Period January 18, 1990 (Date of Commencement of Development Stage) Through December 31, 2000
Deficit Accumulated Additional During the Common Stock Paid In Development Shares Amount Capital Stage Total Balance, December 31, 1995 19,562,859 19,562 513,847 (748,879) (215,470) Common Stock Issued for: Cash ($.25 per share) 10,000 10 2,490 - 2,500 Debt and payables ($.25 per share) 325,506 326 80,605 - 80,931 Services ($0 per share) 979,358 979 - - 979 Net Loss - - - (210,017) (210,017) Balance, December 31, 1996 20,877,723 20,877 596,942 (958,896) (341,077) Common stock Issued for Services ($.09 per share) 100,000 100 9,234 - 9,334 Net Loss - - - (166,212) (166,212) Balance, December 31, 1997 20,977,723 20,977 606,176 (1,125,108) (497,955) Common Stock issued for: Cash ($.10 per share) 1,218,000 1,218 120,982 - 122,200 Debt and payables ($.22 per share) 240,000 240 52,887 - 53,127 Services ($.12 per share) 674,494 675 77,952 - 78,627 Shares canceled (100,000) (100) 100 - - Net Loss - - - ( 366,439) (366,439) Balance, December 31, 1998 23,010,217 23,010 858,097 (1,491,547) (610,440) Common Stock issued for: Cash ($.18 per share) 52,777 53 9,447 - - Services ($0.10 per share) 100,000 100 9,900 - 10,000 Net Loss - - - ( 217,864) (217,864) Balance, December 31, 1999 23,162,994 $23,163 $ 877,444 ($1,709,411) (808,804) Common stock issued for: Cash ($.19 per share) 3,318,269 3,318 632,002 - 635,320 Services ($.26 per share)1,629,925 1,630 427,370 - 429,000 Net loss - - - (1,444,616) (1,444,616) Balance at December 31, 2000 28,111,188 $28,111 $1,936,816 $(3,154,027)$(1,189,100)
48 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Cash Flows Years Ended December 31, 2000 and 1999 and Cumulative Amounts Since January 18, 1990, (Date of Commencement of Development Stage) 2000 1999 Cumulative Amounts Cash flows from operating activities: Net loss $(1,444,616) $(217,864) $(3,154,027) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization - 84 4,609 Common stock issued for services 429,000 10,000 866,801 Note payable issued for services 699,200 - 699,200 Increase (decrease) in: Accounts payable 58,165 64,527 136,846 Accrued interest payable 20,815 5,460 59,695 Accrued liabilities 2,369 - 2,369 Accrued salaries 60,000 96,000 584,000 Net cash used in operating activities (175,067) (41,793) (800,507) Cash flows from investing activities- - - (4,609) Cash flows from financing activities: Increase (decrease) in notes payable 70,637 32,856 238,943 Issuance of common stock 635,320 9,500 1,097,375 Contributed capital - - 750 Net cash provided by financing activities 705,957 42,356 1,337,068 Net increase in cash 530,890 563 531,952 Cash, beginning of period 1,062 499 - Cash, end of period $531,952 $1,062 $531,952
49 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2000 and 1999 1. Organization and Significant Accounting Policies 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 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. 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 issue 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). Development Stage Company The Company is considered a development stage Company as defined in SFAS No. 7. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. Concentration of Credit Risk The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. 50 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2000 and 1999 1. Organization and Significant Accounting Policies Continued Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or terms of the lease, which range from 3 to 5 years. Expenditures for maintenance and repairs are expensed when incurred and betterments are capitalized. Gains and losses on sale of property and equipment are reflected in the statement of operations. Use of Estimates in Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles 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 reporting period. Actual results could differ from those estimates. Income Taxes The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Loss Per Share The computation of basic loss per common share is based on the weighted average number of shares outstanding during each year. Common stock equivalents are not considered in the weighted average calculation as the amounts are antidilutive to the earnings per share. Reclassifications Certain amounts in the 1999 financial statements have been reclassified to conform with the presentation of the current year financial statements. 51 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2000 and 1999 2. Going Concern As of December 31, 2000, the Company's revenue generating activities are not in place, and the Company has substantial recurring net losses from operations. In addition, the Company had an accumulated deficit and a working capital deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company depends heavily on its ability to raise additional funds through equity or debt financing activities. There can be no assurance that such funds will be available to the Company, or available on terms acceptable to the Company. If the Company is unable to raise such funds, it may be unable to commence fully, or continue, operations or generate revenues. 3. Notes Payable Notes payable consist of the following: 2000 1999 Unsecured note payable to an officer of the Company due on demand, interest at 12%, per annum $699,200 $ - Unsecured notes payable to an officer of the Company due on demand, interest at 12% per annum 198,943 128,306 Unsecured note payable to an individual, due on demand, interest at 10% per annum, convertible into common stock at $.4252 per share. 15,000 15,000 Unsecured note payable to a partnership, due on demand, at 12% per annum interest 25,000 25,000 $938,143 $168,306 52 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2000 and 1999 4. Income Taxes The benefit for income taxes is different than amounts which would be provided by applying the statutory federal income tax rate to loss before benefit for income taxes for the following reasons: Years Ended December 31, 2000 1999 Cumulative Amounts Income tax benefit at statutory rate $491,000 $70,000 $981,000 Change in valuation allowance (491,000) (70,000) (981,000) $ - $ - $ - Deferred tax assets are comprised of the following: December 31, 2000 1999 Net operating loss carryforwards $998,000 $507,000 Valuation allowance (998,000) (507,000) $ - $ - At December 31, 2000, the Company had net operating loss carryforwards of approximately $2,936,000. These carryforwards are available to offset future taxable income and begin to expire in 2007. The amount of the loss carryforwards which may be used is dependent upon the tax laws in effect at the time the net operating loss carryforwards can be utilized. The Tax Reform Act of 1986 significantly limits the annual amount that can be utilized for certain of these carryforwards as a result of a substantial change in ownership that took place in a prior year. 53 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2000 and 1999 4. Income Taxes Continued A valuation allowance has been established that offsets the net deferred tax asset because there is uncertainty surrounding its ultimate realization. The uncertainty is caused by the Company's recurring losses and the annual limits referred to above. 5. Related Party Transactions At December 31, 2000 and 1999, related party notes payable consist of unsecured notes payable to an officer with interest at 12% totaling $635,943 and $128,306, respectively. Accrued interest on the related party notes total $56,320 and $38,880 at December 31, 2000 and 1999, respectively. Accounts payable included amounts owed to officers of the Company as reimbursement of Company expenses paid by such officers of $136,845 and $51,433, respectively. 6. Supplemental Cash Flow Information Actual amounts paid for interest and income taxes are as follows: Years Ended December 31, 2000 1999 Cumulative Amounts Interest $5,171 $2,115 $71,604 Income taxes $ - $ - $ - 7. Minority Interest Sanguine Corporation (California) had a total of 6,586,800 shares of its common stock issued and outstanding. Pursuant to the Agreement and Plan of Reorganization, Sanguine Corporation (Nevada) acquired 6,200,000 of the issued and outstanding shares. The resulting 386,800 shares of minority interest in the California Corporation represents approximately six percent (6%) of the Company's outstanding stock. No provision for minority interest has been made on the financial statements because of the losses incurred in the presented periods and the deficit stockholders' equity. 54 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2000 and 1999 8. Commitments Operating Leases The Company leases office space under an operating lease agreement. Future minimum rental payments under the noncancellable operating lease as of December 31, 2000 is approximately as follows: Year Ending December 31, Amount 2001 $20,737 2002 21,318 2003 21,900 2004 7,364 Total future minimum rental payments $71,319 Rent expense related to operating leases was approximately $12,860 and $12,564 for the years ended December 31, 2000 and 1999, respectively. At the present time the Company's President reimburses the Company $596 each month for space he utilizes for non company purposes. Employment Agreements As of December 31, 2000, the Company has two employment agreements with officers. The agreements provide for the payment of salaries, stock and stock options and have terms which shall continue indefinitely. 9. Stock Options Pursuant to the Agreement and Plan of Reorganization dated June 14, 1993, the Company issued an option to an officer of the Company to purchase 470,642 shares of its common stock at $.1275 per share. The option expires on September 22, 2001. The option issued by Sanguine Corporation (Nevada Corporation) replaced options issued by the California Corporation to an officer as part of his compensation for services. When the option was issued by the Company the shares of the Company had no market value. 55 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2000 and 1999 10. Fair Value of Financial Instruments The Company's financial instruments consist of cash and payables. The carrying amount of cash and payables approximates fair value because of the short-term nature of these items. 11. Recent Accounting Pronouncements In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective date of FASB Statement No. 133." SFAS 133 establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as assets or liabilities in the statement of financial position and measurement of those instruments at fair value. SFAS 133 is now effective for fiscal years beginning after June 15, 2000. The Company believes that the adoption of SFAS 133 will not have any material effect on the financial statements of the Company. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. Though the Company is currently evaluating the impact (if any) of SAB 101, the Company does not presently believe it will have a material effect on the financial position or results of operations of the Company. 56 SANGUINE CORPORATION (A Development Stage Company) Index to Financial Statements Page Balance sheet, March 31, 2001 (unaudited) F-1 Statement of operations for the three months ended March 31, 2001 and 2000 (unaudited) and for the period from January 18, 1989 (date of inception) to March 31, 2001 (unaudited) F-2 Statement of cash flows for the three months ended March 31, 2001 and 2000 (unaudited) and for the period from January 18, 1989 (date of inception) to March 31, 2001 (unaudited) F-3 Notes to financial statements F-5 57 SANGUINE CORPORATION (A Development Stage Company) Balance Sheet March 31, 2001 (Unaudited) Assets Current assets: Cash $397,743 Total assets $397,743 Liabilities and Stockholders' Deficit Current liabilities: Related party accounts payable $149,571 Accrued expenses 683,620 Notes payable 919,945 Total current liabilities 1,753,136 Stockholders' deficit: Common stock - par value $.001 per share. Authorized 100,000,000 shares; issued and outstanding 28,186,188 shares 28,186 Additional paid-in capital 1,955,492 Deficit accumulated during the development stage (3,339,071) Total stockholders' deficit (1,355,393) Total liabilities and stockholders' deficit $397,743
58 SANGUINE CORPORATION (A Development Stage Company) Statement of Operations (Unaudited)
Cumulative Three Months Ended Amounts March 31, From 2001 2000 Inception Revenue $ - $ - $150,000 Research and development (64,202) (19,500) (1,023,775) Consulting (18,750) (233,500) (685,270) General and Administrative expenses (80,697) (81,320) (1,641,954) Loss from operations (163,649) (334,320) (3,200,999) Other income (expense) Interest income 6,963 - 21,585 Interest expense (28,358) (21,940) (159,657) Loss before benefit for income taxes (185,044) (356,260) (3,339,071) Benefit for income taxes - - - Net loss $(185,044)$(356,260)$(3,545,536) Loss per share $ (.01)$ (.02) Weighted average number of shares outstanding 28,143,000 23,286,000
59 SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited)
Cumulative Three Months Ended Amounts March 31, From 2001 2000 Inception Cash flows from operating activities: Net loss $(185,044) $(356,260) $(3,339,071) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation - - 4,609 Non cash expenses 18,751 327,500 885,552 Note Payable issued for services - - 699,200 Changes in operating asset & liabilities: (Decrease) increase in accounts payable and accrued expenses 50,282 2,996 833,192 Net cash used in operating activities (116,011) (22,564) (916,518) 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 (18,198) 3,965 220,745 Sales of common stock - 23,900 1,097,375 Contributed capital - - 750 Net cash (used in) provided by financing activities (18,198) 27,865 1,318,870 Net increase (decrease) in cash (134,209) 5,301 397,743 Cash, beginning of period 531,952 1,062 - Cash, end of period $397,743 $ 6,363 $397,743
60 SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited) Continued
Cumulative Three Months Ended Amounts March 31, From 2001 2000 Inception Supplemental disclosure of cash flow information: Interest paid $ 5,802 $21,940 $77,406 Income taxes paid $ - $ - $ -
61 SANGUINE CORPORATION (A Development Stage Company) Notes to Financial Statements March 31, 2001 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 synthetic red blood cells 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). 62 SANGUINE CORPORATION (A Development Stage Company) Notes to Financial Statements Continued 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, 2000 Annual Report on Form 10-KSB. The results of operations for the period ended March 31, 2001 are not necessarily indicative of the operating results for the full year. 63 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ---------- Schvaneveldt and Company, Certified Public Accountants, of Salt Lake City, Utah, audited our financial statements for the calendar years ended December 31, 1999, 1998 and 1997. These financial statements accompanied our Annual Reports on Form 10-KSB for the calendar years ended December 31, 1999, 1998 and 1997, which we have previously filed with the Securities and Exchange Commission. Darrell T. Schvaneveldt, CPA, who owned and operated Schvaneveldt and Company as a sole proprietorship, died on September 8, 2000. During our two most recent calendar years, and since then, our principal independent accountant had not resigned or declined to stand for re-election, and we have not dismissed any principal independent accountant during that period. On September 18, 2000, our Board of Directors unanimously resolved to engage Tanner + Company, Certified Public Accountants, of Salt Lake City, Utah, to audit the our financial statements for the calendar year ended December 31, 2000. There were no disagreements between us and Schvaneveldt and Company, whether resolved or not resolved, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved, would have caused it to make reference to the subject matter of the disagreement in connection with its reports. The reports of Schvaneveldt and Company did not contain any adverse opinion or disclaimer of opinion, and with the exception of a "going concern" qualification for a development stage company, were not qualified or modified as to uncertainty, audit scope or accounting principles. During our three most recent calendar years, and since then, neither Schvaneveldt and Company nor Tanner + Company, has advised us that any of the following exists or is applicable: (1) That the internal controls necessary for us to develop reliable financial statements do not exist, that information has come to their attention that has led them to no longer be able to rely on management's representations or that has made them unwilling to be associated with the financial statements prepared by management; (2) That the they need to expand significantly the scope of their audits, or that information has come to their attention that if further investigated may materially impact the fairness or reliability of a previously issued audit report or the underlying financial statements or any other financial presentation or cause them to be unwilling to rely on management's representations or be associated with our financial statements for the foregoing reasons or any other reason; or 64 (3) That they have advised us that information has come to their attention that they have concluded materially impacts the fairness or reliability of either a previously issued audit report or the underlying financial statements for the foregoing reasons or any other reason. During our three most recent calendar years and since then, we have not consulted Tanner + Company regarding the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements or any other financial presentation whatsoever. You may rely only on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of the prospectus nor the sale of common stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or a solicitation of an offer to buy these shares of common stock in any circumstances under which the offer or solicitation is unlawful. AVAILABLE INFORMATION --------------------- We file periodic reports with the Securities and Exchange Commission. You may inspect and copy these documents at the Public Reference Room of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for additional information. Our Securities and Exchange Commission filings are also available on its web site: http://www.sec.gov. We have filed a registration statement with the Securities and Exchange Commission on Form SB-2, under the Securities Act, with respect to the securities described in this prospectus. This prospectus is filed as part of the registration statement. It does not contain all of the information set forth in the registration statement and the exhibits and schedules filed with it. For further information about us and the common stock described by this prospectus, we refer you to the registration statement and to the exhibits and schedules filed with it. You may inspect or copy these documents at the Public Reference Branch or on the Securities and Exchange Commission's web site. 65 DEALER PROSPECTUS DELIVERY OBLIGATION ------------------------------------- Until ____________, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 66 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 24. Indemnification of Directors And Officers. ------------------------------------------ Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes a Nevada corporation to indemnify any director, officer, employee or corporate agent "who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation" due to his or her corporate role. Section 78.751(1) extends this protection "against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful." Section 78.751(2) of the NRS also authorizes indemnification of the reasonable defense or settlement expenses of a corporate director, officer, employee or agent who is sued, or is threatened with a suit, by or in the right of the corporation. The party must have been acting in good faith and with the reasonable belief that his or her actions were not opposed to the corporation's best interests. Unless a court rules that the party is reasonably entitled to indemnification, the party seeking indemnification must not have been found liable to the corporation. To the extent that a corporate director, officer, employee or agent is successful on the merits or otherwise in defending any action or proceeding referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS requires that he or she be indemnified "against expenses, including attorneys' fees, actually and reasonably incurred by him or her in connection with the defense." Section 78.751(4) of the NRS limits indemnification under Sections 78.751(1) and 78.751(2) to situations in which either (1) the stockholders, (2)the majority of a disinterested quorum of directors, or (3) independent legal counsel determine that indemnification is proper under the circumstances. 65 Pursuant to Section 78.751(5) of the NRS, the corporation may advance an officer's or director's expenses incurred in defending any action or proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides that the rights to indemnification and advancement of expenses shall not be deemed exclusive of any other rights under any bylaw, agreement, stockholder vote or vote of disinterested directors. Section 78.751(6)(b) extends the rights to indemnification and advancement of expenses to former directors, officers, employees and agents, as well as their heirs, executors and administrators. Regardless of whether a director, officer, employee or agent has the right to indemnity, Section 78.752 allows the corporation to purchase and maintain insurance on his or her behalf against liability resulting from his or her corporate role. Article V of our Bylaws requires us to indemnify our directors and executive officers, former directors and executive officers and directors and executive officers of subsidiaries against expenses necessarily incurred by them in defending any action in which they are made parties due to their service as directors or executive officers, except in relation to matters as to which such directors or executive officers are adjudged to be liable for negligence or misconduct. Each of the Employment Agreements between Sanguine California and Dr. Drees Mr. provides for the payment by the losing party of attorneys' fees, costs and other necessary disbursements incurred by the prevailing party in any litigation or arbitration necessary to enforce or interpret the terms of that Employment Agreement. Item 25. Other Expenses of Issuance And Distribution. -------------------------------------------- The following table sets forth the expenses which we expect to incur in connection with the registration of the shares of common stock being registered by this Registration Statement. All of these expenses, except for the Commission registration fee, are estimated: Securities and Exchange Commission registration fee........$ 2,189.09 Legal fees and expenses....................................$50,000 Accounting fees............................................$ 3,500 Printing and engraving expenses............................$ 1,000 Blue Sky Filings...........................................$ 4,000 Transfer agent fees........................................$ 500 Miscellaneous..............................................$ 500 Total................................................$61,689.09 66 Item 26. Recent Sales of Unregistered Securities. ---------------------------------------- We have sold the following "restricted securities" during the past three calendar years: Name Number of Shares Date Consideration - ---- ---------------- ---- ------------- SCS, Inc. 240,000 6/19/98 $ 53,127 Various subscribers 66,494 8/01/98 $ (1) Four subscribers 1,216,000 9/24/98 $124,000 under Rule 506 offering Sunrise Financial, 600,000 10/26/98 $ 60,000 Inc. Tyler Zinck and 18,000 11/02/98 $ 3,240 Robert L. Ganzhorn Nine subscribers 52,777 4/28/99 $ 9,499 under Rule 506 offering 12 subscribers 46,329 5/31/00 $ 23,900 under Rule 506 offering Four subscribers 1,635,970 (2) 9/1/00 $817,985 under Laidlaw Offering Five members of the Advisory Board 230,000 (3) 11/2000-2/2001 Services Five members of the Advisory Board 75,000 (3) 4/2001 Services Laidlaw Global 1,000,000 (4) 4/17/01 Services Securities, Inc. NB, Inc. 250,000 (5) 5/2001 Services (1) Various prices from $0.10 to $0.25 per share in cash and/or services. (2) We sold 1,635,970 units in the Laidlaw Private Offering. Each unit consisted of two shares of our common stock and one redeemable warrant entitling the holder to purchase one share of our common stock at a price of $0.40 per share. This exercise price has been reduced to $0.35 per share because the Company's registration statement was not filed within 30 days of the closing of the offering. (3) See the caption "Executive Compensation" of the Registration Statement. (4) These securities were conveyed by our President, Thomas C. Drees, Ph.D., as payment for consulting and investment banking services, and will be repaid to Dr. Drees, together with an additional 1% of this amount of shares for every month until the shares have been returned, which shall occur once $2,000,000 in debt or equity financing have been raised by us. (5) These shares were issued for business consulting services. We issued all of these securities to persons who were either "accredited investors," or "sophisticated investors" who, by reason of education, business acumen, experience or other factors, were fully capable of evaluating the risks and merits of an investment in our company; and each had prior access to all material information about us. We believe that the offer and sale of these securities was exempt from the registration requirements of the Securities Act, pursuant to Sections 4(2) and 4(6) thereof, and Regulation D of the Securities and Exchange Commission and from various similar state exemptions. Item 27. Exhibits -------- The following exhibits are filed as a part of this Registration Statement:
Exhibit Number Description - ------ ------------ 2.1 Articles and Agreement of Merger whereby 10-SB the Company changed its domicile from the State of Utah to the State of Nevada and effecting a one for twenty reverse split of its outstanding voting securities, effective July 13, 1992.* 2.2 Agreement and Plan of Reorganization between 10-SB us and Sanguine Corporation, a California corporation, effective June 14, 1993.* 3.1 Initial Predecessor Articles of Incorporation 10-SB filed January 24, 1974.* 3.2 Amendment to Predecessor Articles of 10-SB Incorporation filed July 8, 1974, reflecting a name change to "Kricket Corporation."* 3.3 Amendment to Predecessor Articles of 10-SB Incorporation filed October 13, 1977, increasing the authorized capital to $250,000.* 3.4 Amendment to Predecessor Articles of 10-SB Incorporation filed December 22, 1986, increasing the authorized capital to $1,000,000.* 68 3.5 Amendment to Predecessor Articles of 10-SB Incorporation filed December 5, 1977, reflecting a name change to "International Health Resorts, Inc."* 3.6 Initial Articles of Incorporation of 10-SB International Health Resorts, Inc., a Nevada corporation ("International Nevada," now our Article of Incorporation) filed February 5, 1992.* 3.7 Bylaws of International Nevada (now the 10-SB Our Bylaws).* 3.8 Certificate of Amendment to our 10-SB Articles of Incorporation reflecting a name change to "Sanguine Corporation" effective June 25, 1993, and effecting a 1.5 for one forward split of our outstanding common stock, effective June 28, 1993.* 3.9 Certificate of Amendment to our 10-SB Articles of Incorporation decreasing the required number of directors from a minimum of three to not less than one director, effective November 10, 1993.* 5 Opinion of Branden T. Burningham, Esq. regarding legality.* 10.1 Laidlaw Investment Banking Letter 10.2 Promissory Note regarding 1,000,000 shares conveyed to Laidlaw 10.6 Employment Agreement with Dr. Thomas C. Drees.* 10-SB 10.7 Employment Agreement with Anthony G. Hargreaves.* 10-SB 21 Subsidiaries of the Registrant.* 23.1 Consent of Branden T. Burningham, Esq.* 23.2 Consent of Tanner + Company 99.2 8-K Current Report dated June 8, 2000, regarding Westbury Warrant Agreement.* 99.3 8-KA Current Report dated June 8, 2000, regarding amendments to the Westbury Warrant Agreement.* 99.3 8-K Current Report dated September 1, 2000, regarding the Laidlaw Private Offering.* 99.3 8-K Current Report dated September 18, 2000, regarding the death of our independent accountant and the selection of replacement independent auditors.* 99.3 8-K Current Report dated January 19, 2001, regarding Irisys Research and Development LLC Services Agreement.
69 Item 28. Undertakings ------------ Sanguine hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and, notwithstanding the foregoing, any increase or decrease in volume of securities offered, if the total dollar value of securities offered would not exceed that which was registered, and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, to treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time shall be deemed to be the initial bona fide offering. (3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (4) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, executive officers and controlling persons the foregoing provisions or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission that indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. If a claim for indemnification against these liabilities, other than our payment of expenses incurred or paid by any of our directors, executive officers or controlling persons in the successful defense of any action, suit or proceeding, is asserted by the director, executive officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of that issue. SIGNATURES ---------- In accordance with the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing of Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned in the City of Pasadena, State of California, on 7th, June, 2001. SANGUINE CORPORATION Date: June 7, 2001 By /s/ Thomas C. Drees ------------ ------------------------------------- Thomas C. Drees, Ph.D., MBA Chairman, CEO and President In accordance with the requirements of the Securities Act, this registration statement was signed by the following persons in the capacities and on the dates stated. Date: June 7, 2001 By /s/ Thomas C. Drees ------------ ------------------------------------- Thomas C. Drees, Ph.D., MBA Chairman, CEO and President Date: June 7, 2001 By /s/ Anthony G. Hargreaves ------------ ------------------------------------- Anthony G. Hargreaves, Vice Chairman, Vice President, Secretary/Treasurer and Director Date: June 7, 2001 By /s/ David E. Nelson ------------ ------------------------------------ David E. Nelson, CPA CFO and Director SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBITS TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SANGUINE CORPORATION EX-10 2 laidlaw.txt [Laidlaw Global Securities, Inc. letterhead] March 12, 2001 TO: Thomas Drees, Phd.-Chairman, Sanguine Corporation FROM: Roger Bendelac-CEO, Laidlaw Global Securities Please be advised that as consideration and in exchange for your assignment of one million shares of 144 common stock of Sanguine Corporation to Laidlaw Global Securities, Laidlaw has and will continue to do the following: Assist Sanguine Corporation in connection with the negotiation of a termination of its Warrant Agreement with Westbury Consultancy Services Ltd. Continue the ongoing investment banking relationship between Sanguine Corporation and Laidlaw Global Securities, with the intent to assist on a best efforts basis future capital raises for the company's general corporate purposes. Develop a more informed shareholder base. Assist with the development of strategic relationships within related industries. We are looking forward to building a stronger relationship in the coming months. Please deliver the stock certificate within the next ten days. Should you have any questions or comments, please feel free to contact me anytime. Signed:/s/R. Bendelac EX-10 3 note.txt PROMISSORY NOTE FOR VALUE RECEIVED, Sanguine Corporation ("Borrower"), a Nevada corporation, hereby promises to pay to Thomas C. Drees, Ph.D. ("Lender"), an individual, the principal sum of 1,000,000 "unregistered" and "restricted" shares of the Borrower's common stock on the maturity date as defined below. MATURITY. This note shall be payable in full as to both principal and interest three business days following Sanguine's receipt of a cumulative capital infusion of $2,000,000 whether by debt or equity or a combination thereof. PREPAYMENT PENALTY. None. INTEREST. Interest shall accrue on the principal at the interest rate of 1% per month, payable monthly. Beyond maturity, in the event of default, the interest shall accrue and be compounded monthly at the rate of 15% per annum on the sum of the interest and principal amount in default. GOVERNING LAW. This note shall be governed by the laws of the State of California. ACKNOWLEDGED AND TERMS ACCEPTED: Borrower: Sanguine Corporation Dated April 17, 2001 101 East Green Street, #11 Pasadena, California 91105 (626) 405-0079 By:/s/Anthony G. Hargreaves Anthony G. Hargreaves Vice-President, Secretary/Treasurer Lender: Thomas C. Drees, Ph.D. Dated April 17, 2001 784 St. Katherine Drive La Canada, CA 91101 (626) 405-0079 By:/s/Thomas C. Drees, Ph.D. Thomas C. Drees President and CEO EX-23 4 tancon.txt [Tanner + Co. letterhead] CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use in this Registration Statement on Form SB-2 Post Effective Amendment #1 of our report dated March 8, 2001, relating to the financial statements of Sanguine Corporation and to the reference to our Firm under the caption "Experts" in the Prospectus. Tanner + Co. Salt Lake City, Utah June 1, 2001 -----END PRIVACY-ENHANCED MESSAGE-----