10QSB 1 q901.txt U. S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- --------------- Commission File No. 0-24480 SANGUINE CORPORATION (Name of Small Business Issuer in its Charter) NEVADA 95-4347608 ------ ---------- (State or Other Jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) 101 East Green Street, #11 Pasadena, California 91105 --------------------------- (Address of Principal Executive Offices) Issuer's Telephone Number: (626) 405-0079 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No (2) Yes X No --- --- --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Not applicable. APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: September 30, 2001 28,888,382 ---------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The Financial Statements of the Registrant required to be filed with this 10-QSB Quarterly Report were prepared by management, and commence on the following page, together with Related Notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant. SANGUINE CORPORATION (A Development Stage Company) Index to Financial Statements Page Balance sheet, September 30, 2001 (unaudited) F-1 Statement of operations for the three and nine months ended September 30, 2001 and 2000 (unaudited) and for the period from January 18, 1989 (date of inception) to September 30, 2001 (unaudited) F-2 Statement of cash flows for the nine months ended September 30, 2001 and 2000 (unaudited) and for the period from January 18, 1989 (date of inception) to September 30, 2001 (unaudited) F-3 Notes to financial statements F-5 SANGUINE CORPORATION (A Development Stage Company) Balance Sheet September 30, 2001 (Unaudited) Assets Current assets: Cash $121,947 Prepaid expense 138,750 -------- Total assets $260,697 ======== Liabilities and Stockholders' Deficit Current liabilities: Related party accounts payable $182,664 Accrued expenses 771,796 Notes payable 1,101,879 ---------- Total current liabilities 2,056,339 ---------- Stockholders' deficit: Common stock - par value $.001 per share. Authorized 100,000,000 shares; issued and outstanding 28,888,382 shares 28,888 Additional paid-in capital 2,042,040 Deficit accumulated during the development stage (3,866,570) ---------- Total stockholders' deficit (1,795,642) ---------- Total liabilities and stockholders' deficit $ 260,697 ==========
See accompanying notes to financial statements. F-1 SANGUINE CORPORATION (A Development Stage Company) Statement of Operations (Unaudited)
Cumulative Three Months Ended Nine Months Ended Amounts September 30, September 30, From 2001 2000 2001 2000 Inception Revenue $ - $ - $ - $ - $ 150,000 Research and development (68,535) (16,800) (176,322) (55,800)(1,187,612) Consulting (81,875) (84,375) (187,250) (351,875) (853,770) General and Administrative expenses (83,446) (36,972) (265,261) (146,648)(1,981,266) -------- -------- -------- -------- ---------- Loss from operations (20,856) (138,147) (628,832) (554,323)(3,872,648) Other income (expense) Interest income 1,025 - 12,758 - 27,380 Interest expense (37,422) (6,691) (96,468) (31,809) (227,767) -------- -------- -------- -------- --------- Loss before benefit for income taxes (270,253) (144,838) (712,543) (586,132)(4,073,025) Benefit for income taxes - - - - - -------- -------- -------- -------- --------- Net loss $(270,253)$(144,838)$(712,543)$(586,132$(4,073,025) ======== ========= ========= ========= ========== Loss per share $ (.01)$ (.01)$ (.02)$ (.02) ======== ========= ========= ========= Weighted average number of shares outstanding 28,879,000 25,256,000 28,522,000 24,106,000 =============================================
See accompanying notes to financial statements. F-2 SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited)
Cumulative Nine Months Ended Amounts September 30, From 2001 2000 Inception Cash flows from operating activities: Net loss $(712,543) $(586,132) $(3,866,570) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation - - 4,609 Common stock issued for services 62,876 419,500 929,677 Note Payable issued for services - - 699,200 Changes in operating asset & liabilities: Decrease in other Assets 124,375 - 124,375 Increase in accounts payable and accrued expenses 171,551 192,658 954,461 --------- --------- ----------- Net cash provided by (used in) operating activities (353,741) 26,026 (1,154,248) --------- --------- ----------- 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 (56,264) (2,035) 182,679 Sales of common stock - 635,321 1,097,375 Contributed capital - - 750 --------- --------- ----------- Net cash provided by financing activities (56,264) 633,286 1,280,804 --------- --------- ----------- Net increase (decrease) in cash (410,005) 659,312 121,947 Cash, beginning of period 531,952 1,062 - --------- --------- ----------- Cash, end of period $121,947 $660,374 $121,947 ========= ========= ===========
See accompanying notes to financial statements. F-3 SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited) Continued
Cumulative Nine Months Ended Amounts September 30, From 2001 2000 Inception Supplemental disclosure of cash flow information: Interest paid $ 15,736 $2,730 $87,340 Income taxes paid $ - $ - $ -
See accompanying notes to financial statements. F-4 SANGUINE CORPORATION (A Development Stage Company) Notes to Financial Statements September 30, 2001 1. 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 September 30, 2001 are not necessarily indicative of the operating results for the full year. 2. Earnings Per Share The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is antidilutive. F-5 Item 2. Management's Discussion and Analysis or Plan of Operation. -------------------------------------------------------------------- Plan of Operation. ------------------ 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 toxicity 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 toxicity 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; toxicity 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 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, with Abbott Labs and others. 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 toxicity tests in accordance with FDA and comparable foreign overseas regulations. 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. For risks that may have an adverse effect on our proposed operations, see the caption "Risk Factors" of our SB-2 Registration Statement, as amended, which was filed with the Securities and Exchange Commission on or about December 6, 2000, and which is incorporated herein by reference. Results of Operations. ---------------------- During the quarterly period ending September 30, 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 ($295,753), as compared with the quarterly period ended September 30, 2000, when the Company received total revenue of $0 and sustained a net loss of ($144,838). During this quarter, Sanguine California merged with and into the Company. See Item 5. For the nine months ended September 30, 2001, the Company received total revenue of $0 and sustained a net loss of ($738,043), as compared with the nine months ended September 30, 2000, when the Company received total revenue of $0 and sustained a net loss of ($586,132). Liquidity. ---------- As of September 30, 2001, the Company had $121,947 in cash and $138,750 in prepaid expenses, with $2,056,339 in current liabilities. PART II - OTHER INFORMATION Item 1. Legal Proceedings. ---------------------------- None; not applicable. Item 2. Changes in Securities and Use of Proceeds. --------------------------------------------------- None; not applicable. Item 3. Defaults Upon Senior Securities. ------------------------------------------ None; not applicable. Item 4. Submission of Matters to a Vote of Security Holders. -------------------------------------------------------------- None; not applicable. Item 5. Other Information. ---------------------------- Effective August 24, 2001, the Board of Directors of the Company, and the Board of Directors and the majority stockholder of Sanguine Corporation, a California corporation ("Sanguine California"), voted to adopt an Agreement and Plan of Merger (the "Plan"), by which Sanguine California would be merged with and into the Company, with the Company being the surviving corporation. Immediately prior to the merger, Sanguine California was the Company's 94%-owned subsidiary. The Plan provided for the Company to issue a total of 910,225 "unregistered" and "restricted" shares of its common stock to the six minority stockholders of Sanguine California, in exchange for all Sanguine California shares held by such stockholders. Four of the six minority stockholders, who collectively held 357,040 shares of Sanguine California common stock, agreed to the merger and the issuance of a total of 840,195 shares of the Company's common stock in exchange for all of their Sanguine California shares. The remaining stockholders have not been located, but shares have been issued for their benefit and are being held by the Company's transfer agent. All of these shares were issued subsequent to the quarter ended September 30, 2001, and are not included in the computations contained in this report. See the Company's 8-K Current Report dated September 26, 2001, which has been previously filed with the Securities and Exchange Commission and is incorporated herein by reference. See Item 7. Item 6. Exhibits and Reports on Form 8-K. ------------------------------------------- (a) Exhibits. 10-SB-A1 Registration Statement.* Form 10-KSB Annual Report for the Year ended December 31, 2000.* (b) Reports on Form 8-K. 8-K Current Report dated January 19, 2001.* 8-K Current Report dated September 26, 2001.* * Incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned there unto duly authorized. SANGUINE CORPORATION Date: 11/14/01 By:/s/Thomas C. Drees --------- ------------------------------------- Thomas C. Drees, CEO, President and Chairman of the Board of Directors Date: 11/14/01 By:/s/Anthony G. Hargreaves --------- ------------------------------------- Anthony G. Hargreaves Vice President, Secretary/ Treasurer Director Date: 11/14/01 By:/s/David E. Nelson --------- ------------------------------------- David E. Nelson CFO and Director