-----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, WtgS0qKe5Oim3foMVZkIiQQHAOHyRkyJa8CVWDEb3lca7fYqf5Yl7U76mfCuI596 dkXtIq8W+lFI0E70DJsYyw== 0001010412-02-000064.txt : 20020416 0001010412-02-000064.hdr.sgml : 20020416 ACCESSION NUMBER: 0001010412-02-000064 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020410 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: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24480 FILM NUMBER: 02606672 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 10KSB 1 k01.txt ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2001 U. S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 -------------------------- N/A --- (Former Name or Former Address, if changed since last Report) Securities Registered under Section 12(b) of the Exchange Act: None - -------------------------------------------------------------- Name of Each Exchange on Which Registered: None - ------------------------------------------ Securities Registered under Section 12(g) of the Exchange Act: - -------------------------------------------------------------- $0.001 par value common stock Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Company 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 --- --- --- --- Check if there is no disclosure of delinquent files in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Company's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] State Issuer's revenues for its most recent fiscal year: December 31, 2001 - $0. State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. March 27, 2002 - $2,740,128.30. There are approximately 19,572,345 shares of common voting stock of the Registrant beneficially owned by non-affiliates. This valuation is based upon the average bid prices for the common stock of the Registrant on the OTC Bulletin Board of the NASD on March 27, 2002. N/A --- (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) (APPLICABLE ONLY TO CORPORATE ISSUERS) March 27, 2002 - 30,723,607 --------------------------- State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date: Part III, Item I ---------------- DOCUMENTS INCORPORATED BY REFERENCE Transitional Small Business Issuer Format: Yes X No - ------------------------------------------ --- ---- 1 PART I Item 1. 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. 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 December 5, 1977, we changed our name to "International Health Resorts, Inc." 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 Corporation, a California corporation ("Sanguine California"), in exchange for shares of our common stock, and we succeeded to intended operations of Sanguine California, which are those activities described under the caption "Business" below. We effected a 1.5 for one forward split of our outstanding securities and changed our name to "Sanguine Corporation" on June 25, 1993. On September 1, 2000, we completed a private placement of certain securities through Laidlaw Global Securities, Inc. of New York, New York (respectively, "Laidlaw" and 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. The warrant exercise price was reduced to $.35 per share because the Company was unable to timely file a registration statement with the Securities and Exchange Commission covering the shares underlying these warrants. Laidlaw was also granted the option to acquire 163,597 of these units at an exercise price of $0.001 per share as part of its 2 compensation related to this offering. With the exception that Laidlaw has exercised its warrants to acquire the common stock and warrants that comprised these units, none of these warrants have been exercised. For additional information respecting the Laidlaw Private Offering, see the Company's 8-K Current Report dated September 1, 2000, which is incorporated herein by reference. For a complete description of these warrants, see the Company's SB-2 Registration Statement filed with the Securities and Exchange Commission on or about December 8, 2000 (the "Registration Statement"), which is incorporated herein by reference, and pursuant to which the common stock and other securities principally held by the investors in the Laidlaw Private Offering were registered for resale. See Part III, Item 13. On January 19, 2001, Sanguine executed a Service Agreement with Irisys Research and Development LLC ("IriSys") pursuant to which IriSys would 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 Sanguine's product, PHER-O2, a synthetic substitute for human red blood cells. For more information on this Service Agreement, see the 8-K Current Report of the Company dated January 19, 2001, which is incorporated herein by reference. See Part III, Item 13. On February 27, 2001, Sanguine executed a Consulting Agreement with National Financial Communications Corp. ("NFC") whereby NFC shall provide public relations, communications services, advisory and consulting services for the Company, commencing March 1, 2001, for a period of one year. In accordance with the Consulting Agreement, the Company pays $5,000 per month, plus expenses, for these services. We filed Articles of Merger in the State of Nevada on September 11, 2001, and in the State of California on September 26, 2001, to acquire the remaining 6% of the outstanding securities of Sanguine California, our 94%-owned subsidiary through which substantially all of our operations had been conducted from our succession to these operation in June, 1993; and we simultaneously qualified to do business in the State of California as a 3 foreign corporation. 910,225 shares of our common stock were issued to the persons who owned the remaining 6% of Sanguine California. For more information on this merger, see the 8-K Current Report of the Company dated September 26, 2001, which is incorporated herein by reference. See Part III, Item 13. On November 5, we executed a Financial Consulting Services Agreement with Ascendiant Capital Group, Inc. ("Ascendiant") for a period of 12 months. The services to be provided include but are not limited to advice regarding mergers and acquisitions, client introductions and advice regarding financing sources. In connection with this Agreement, the Company issued 825,000 shares of common stock which resulted in $103,950 of general and administrative expenses. We filed an S-8 Registration Statement with the Securities and Exchange Commission December 17, 2001, which is incorporated herein by reference, to register 825,000 shares of our common stock for services rendered and to be rendered for our benefit by three consultants, Richard H. Walker, Mark Bergendahl and Bradley J. Wilhite. These persons are "affiliates" of Ascendiant. See Part III, Item 13. Events Subsequent to December 31, 2001. - --------------------------------------- * On February 15, 2002, we entered into an Exclusive License Agreement (the "Exclusive License Agreement") with Ascendiant-Asia, LLC, a Nevada limited liability corporation ("Ascendiant-Asia"), whereby we granted to Ascendiant-Asia an exclusive license to PHER-02, our developmental synthetic red blood cell product, the licensed process and all proprietary, formula, developmental, technological, intellectual property and patent rights, and all other applications of the above in certain countries in Asia, including the People's Republic of China, Thailand, Laos, Cambodia, Vietnam, Singapore, Malaysia, Indonesia, North Korea, Burma, Mongolia and Taiwan. * On February 20, 2002, we executed and delivered three warrants under which we granted to Richard H. Walker, Mark Bergendahl and Bradley J. Wilhite warrants to acquire 1,000,000 shares each of our common stock at an exercise price of $0.15 per share. The Company estimates the issuance of these warrants for services will result in approximately $330,000 of expenses in the first quarter of 2002. * We entered into the following agreements with First York Partners, Inc. ("First York Partners"): A 5% Convertible Note for the sum of $25,000 convertible at the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the time the principal trading exchange or market for the common stock, the "Principal Market"), or if not then trading on a Principal Market, such other principal market or exchange where the common stock is listed or traded for the five trading days immediately preceding but not including a conversion date. The beneficial conversion feature of the note is estimated to result in $25,000 in additional interest expense; 4 A Common Stock Purchase Warrant for the right to purchase 5,937,500 shares of common stock of the Company exercisable at a purchase price of $.08, provided, however, the purchase price shall be adjusted to be sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices for the Common Stock as reported for the Principal Market (as defined in Section 10(d) of this Warrant) for the five trading days preceding but not including the effective date of the registration statement referred to in Section 10.1(iv) of the Subscription Agreement. Except in connection with other adjustments set forth in this Warrant the Purchase Price will not be adjusted below $.08. The Company estimates the issuance of the warrants for services will result in approximately $712,000 of expenses in the first quarter of 2002; A related Subscription Agreement regarding the 5% convertible note and the Common Stock Purchase Warrant, granting, among other rights, registration rights of the exercise and or conversion of any of the notes and/or warrants described, protection against dilution in certain events, including the payment of dividends or splits or in the event of any merger where we are not the survivor, or any reclassification or capital reorganization, and call provisions for the benefit of the Company; A related Fund Escrow Agreement respecting the disbursement of the proceeds of the 5% convertible note and related matters; and A $3,750 5% convertible note to Barbara R. Mittman for legal services rendered regarding all of the foregoing on behalf of First York Partners convertible at the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the time the principal trading exchange or market for the common stock, the "Principal Market"), or if not then trading on a Principal Market, such other principal market or exchange where the common stock is listed or traded for the five trading days immediately preceding but not including a conversion date. * We approved an Engagement Letter to engage Leonard W. Burningham, Esq. to perform certain legal services for us and that included the granting of warrants to Mr. Burningham to purchase 500,000 shares of common stock at the exercise price equal to the lower of 50% of the average bid price of the Company's common stock for the five trading days prior to the exercise of the warrant or $0.08 per share. The Company estimates the issuance of these warrants for services will result in approximately $60,000 of expenses in the first quarter of 2002. All of these subsequent event matters were adopted by the Board of Directors at a special meeting held on March 11, 2002, and are fully discussed in an 8-K Current Report of the Company dated March 11, 2002, which is incorporated herein by reference. See Part III, Item 13. * On April 1, 2002, we entered into an Exclusive License Agreement (the "Exclusive License Agreement") with Ascendiant-South America, LLC, a Nevada limited liability 5 corporation ("Ascendiant-South America"), whereby we granted to Ascendiant-South America an exclusive license to PHER-02, our developmental synthetic red blood cell product, the licensed process and all proprietary, formula, developmental, technological, intellectual property and patent rights, and all other applications of the above South America. 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 25 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 completed the compounding of PHER-O2, and 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 second phase of development will involve: * seeking regulatory approval for gross animal testing and conducting this testing; and * the manufacturing of available product for this testing. In our third 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 transfusion; and * complete overseas testing in China and begin overseas sales there and in other Asian countries. 6 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. PHER-O2 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 will be able to raise the money necessary to develop PHER-O2 or that, if we raise sufficient funds, that we will 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 one lead product, PHER-O2. Our success hinges largely 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 improved drug from Fluosol-DA, the only synthetic red blood cell approved by the FDA. This approval was completed under the management of our President and CEO, Thomas C. Drees, Ph.D. 7 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, emergency rooms and battle fields. As HIV, hepatitis 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 in 1989 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 8 would otherwise be. This competitor announced in 1993 that it would no longer manufacture its product, leaving us well positioned in this market segment. 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. Five 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); * Hemasol, Inc. of Etobicoke, Ontario, Canada (outdated human blood); * Northfield Laboratories, Inc. of Evanston, Illinois, (outdated human blood); and * Synthetic Blood International, San Diego, Califronia, (PFC). 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. 9 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. At the present time, the above five companies have suspended clinical trials. 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 or other facilities, depending upon funding. FluoroMed, LP, F2 Chemicals, Ltd. and KC America 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, B. Braun Medical Inc., Fresenius Kabi, and Alliance Medical Products, Inc. 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 Nos. 07/952/403 and 08/230/672, covering PHER-O2, with the United States Patent Office on September 28, 1992 and April 21, 1994, respectively. 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, perfluoro-decalin, to maintain the small particle size in the emulsion of PHER-O2 because the particle size of decalin alone 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 clearly own five formulas, and the dispute is over eight others which are very expensive and may never be used. Governmental Approval of Principal Products or Services. - -------------------------------------------------------- 10 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." We can not assure you that these testing procedures will be successfully completed, that if completed, they will show PHER-O2 to be safe and efficacious, or that we will obtain any required governmental approvals. Nor can we assure you that we will 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. 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 lead 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 can 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 would 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, except, successful stability tests. 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 review 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. 11 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. 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 does 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 will 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. - ---------------------------------- Since inception we have expended a total of approximately $1,199,297 on research and development. During years ended December 31, 2001 and 2000, research and development expense was $188,007 and $67,485, respectively. None of these costs were borne by customers or others. 12 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 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. Item 2. 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 $1,764.20 per month. The lease runs through April 30, 2004. Item 3. Legal Proceedings. ------------------ We are not a party to any pending 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. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- None; not applicable. PART II Item 5. Market for Common Equity and Related Stockholder Matters. --------------------------------------------------------- Market Information. - ------------------- The Company's common stock commenced to trade on the "OTC Bulletin Board" of the National Association of Securities Dealers, Inc. ("NASD") in the second quarter of 1994 under the symbol "SGNC." The range of high and low bid quotations for the Company's common stock during the each quarter of the year ended December 31, 1999, each quarter of the calendar year ended December 31, 2000, and each quarter of the calendar year ended December 31, 2001, 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. 13
STOCK QUOTATIONS* BID Quarter ended: High Low - -------------- ---- --- 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 $.32 $.1875 June 30, 2001 $.50 $.17 September 30, 2001 $.32 $.15 December 31, 2001 $.21 $.11
* The future sale of presently outstanding "restricted securities" (common stock) of the Company by present members of management and others may have an adverse effect on any market in the shares of common stock of the Company. See the heading " Recent Sales of Unregistered Securities," below. Recent Sales of Unregistered Securities. - ---------------------------------------- The following "restricted securities" of the Company were sold during the past three calendar years: Number of Name Shares or Units Date Consideration - ---- --------------- ---- ------------- 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 530,000 (3) 11/2000-1/2002 Services 14 NB, Inc. 250,000 (4) 5/2001 Services Laidlaw Global Securities, Inc. 327,194 (2) 5/2001 Warrant Ex Five subscribers 840,195 (5) 11/2001 Sub-Merger from California Corporation (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. Laidlaw received warrants to acquire 10% of these units as part of its compensation. (3) See the caption "Executive Compensation" of the Registration Statement. (4) Miscellaneous public relations services. (5) Issued in connection with the acquisition of the remaining 6% interest in our 94%-owned subsidiary, Sanguine California. 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 15 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. Holders. - -------- The number of record holders of the Company's common stock as of March 27, 2002, was approximately 525. 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. Item 6. Management's Discussion and Analysis or Plan of Operation. ---------------------------------------------------------- Plan of Operation. - ------------------ We have not commenced planned principal operations, but have made good progress since the end of fiscal 1998, in formation and stability testing. Our proposed plan of operation is composed of three "stages," each of which coincides with a specific milestone in the process of developing PHER- O2. Each of these stages will begin subject to available funding. Each stage, and the projected cost of each, is as follows: Stage A (approximately one year): In the first six months, we have completed the development of perfluoro-decalin and the synthetic surfactants that make up PHER-O2, manufactured experimental doses and will perform preliminary animal tests in accordance with FDA and overseas regulations. In the second six months, we will produce optimal quantities and conduct animal safety and efficacy trials in accordance with FDA and overseas requirements. During the course of Stage A, 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. Stage B (approximately one year): In the second year, we intend to prepare New Drug Applications for FDA, European, Chinese and South American approval, conducted in the United States and overseas. During this period, we also plan to submit license applications for transfusion with overseas authorities, begin 16 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 Stage B, we estimate that we will need to hire a few additional employees. Estimated cost is $5,000,000, divided as follows: Prepare and file United States, European, Chinese and South American New Drug Applications, $600,000; conduct human safety and efficacy trials through a subcontractor in the United States and overseas, $3,200,000; 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. Stage C (approximately one year): In the third year, we plan to complete overseas testing of PHER-O2, begin sales in Europe, China, and South America 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 Stage C, 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, South American, Chinese and Canadian sales for cancer treatment and angioplasty. During this period, we also plan 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 Stage C is $25,000,000, divided as follows: Complete human safety and efficacy clinical trials and obtain United States and overseas agency approval of PHER-O2, $13,000,000; subcontract with major emulsifying firm, $5,000,000; recruit and train sales force of the United States and foreign markets, $5,000,000; and administrative, patent and proprietary right protection and marketing costs, $2,000,000. These cost estimates are based upon the prior experience of Thomas C. Drees, Ph.D., our President and CEO. Dr. Drees has more than 30 years' experience in the blood industry. Our plan of operation for the next 12 months is to: * manufacture experimental doses of PHER-O2; and * perform preliminary animal tests in accordance with FDA and * comparable foreign overseas regulations. In January, 2001, we engaged IriSys, Inc. ("IriSys") to provide us 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 principal product, PHER-O2, to produce bottled PHER-02 for animal trials, and to conduct stability trials. We were successful in developing improved formulations of our surfactants. 17 In March, 2002, we granted an Exclusive License Agreement for parts of Asia regarding PHER-02 and related technology and patents to Ascendiant-Asia and Ascendiant-South America. Our ability to carry out our plan depends entirely upon our ability to obtain additional substantial equity, debt financing or royalties. We can not assure you that we will receive this financing, and except for the possibility of receiving funds from the exercise of outstanding warrants, we do not have any arrangements that would ensure us any funding. If we do not receive it, we will not be able to proceed with our business plans. Results of Operations. - ---------------------- Revenues for the calendar years ending December 31, 2001 and 2000 were $0 and $0, respectively. We had no material operations, except the research and development activities related to our subcontracted research and development of our product. We realized a net loss of ($1,037,570), with a loss of ($.04) per share during the calendar year ended December 31, 2001, and a net loss of $(1,444,616), with a loss of $(0.06) per share for the year ending December 31, 2000. Our research and development expenses were $188,007 in 2001, compared to $67,485 in 2000. The increase in 2001 was for developmental expenses related to our research and development contract with IriSys. Liquidity. - ---------- As of December 31, 2001, we had $23,445 in cash, with $2,100,989 in current liabilities. During the calendar year ended December 31, 2001, we had net expenses of $918,166, while receiving $0 in revenues. We received no revenues, and had total expenses of $1,409,670 during the calendar year ended December 31, 2000. Cash resources at December 31, 2001 and 2000 were $23,445 and $531,952, respectively. Liquidity was provided through the sale of our common stock in 2000 in the net amount of $635,320. Item 7. Financial Statements. --------------------- Financial Statements for the years ended December 31, 2001, and December 31, 2000 Independent Auditors Report Balance Sheet - December 31, 2001 and 2000 18 Statements of Operations Accumulated for the Period January 18, 1990 to December 31, 2001 and the Years ended December 31, 2001 and 2000 Statements of Stockholders' Equity January 18, 1990 to December 31, 2001 Statements of Cash Flows Accumulated for the Period January 18, 1990 to December 31, 2001 and the Years Ended December 31, 2001 and 2000 Notes to Financial Statements 19 SANGUINE CORPORATION Consolidated Financial Statements December 31, 2001 and 2000 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-9 Notes to Consolidated Financial Statements F-10 F-1 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, 2001 and 2000, and the related consolidated statements of operations, stockholders' deficit and cash flows for the years then ended and cumulative amounts from January 18, 1990 (date of commencement of development stage) through December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards of the United States of America. 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 audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sanguine Corporation as of December 31, 2001 and 2000, and the results of their operations and their cash flows for the years then ended and cumulative amounts from January 18, 1990 (date of commencement of development stage) through December 31, 2001, in conformity with generally accepted accounting principles of the United States of America. 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 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. /s/TANNER + CO. Salt Lake City, Utah March 12, 2002 F-3 SANGUINE CORPORATION (A Development Stage Company) Consolidated Balance Sheet December 31, - ----------------------------------------------------------------------------- Assets 2001 2000 Current assets - cash $23,445 $531,952 Prepaid expense 69,375 - 92,820 531,952 Property and equipment less accumulated depreciation of $4,609 for 2001 and 2000 - - $92,820 $531,952 Liabilities and Stockholders' Deficit Current liabilities: Related party payables $192,548 $136,845 Accrued salaries 644,000 584,000 Accrued interest payable 172,095 59,695 Other accrued expenses 2,369 2,369 Notes payable 1,089,977 938,143 Total current liabilities 2,100,989 1,721,052 Commitments - - Stockholders' deficit: Common stock 100,000,000 shares authorized, $.001 par value; 30,603,577 and 28,111,188 shares issued and outstanding, respectively 30,604 28,111 Paid-in capital 2,152,824 1,936,816 Deficit accumulated during the development stage (4,191,597) (3,154,027) Total stockholders' deficit (2,008,169) (1,189,100) Total liabilities and stockholders' deficit $92,820 $531,952
See accompanying notes to consolidated financial statements. F-4 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Operations Years Ended December 31, 2001 2000 Cumulative Amounts Revenue $ - $ - $ 150,000 Research and development (188,007) (67,485) (1,199,297) Consulting (369,125) (369,000) (1,035,645) General and administrative expenses (361,034) (973,185) (2,077,039) Loss from operations (918,166) (1,409,670) (4,161,981) Other income (expense): Interest income 12,831 9,780 27,453 Interest expense (132,235) (44,726) (263,534) Loss before benefit for income taxes (1,037,570) (1,444,616) (4,398,062) Benefit for income taxes - - - Net loss $(1,037,570) $(1,444,616) $(4,398,062) Loss per common share - basic and diluted $ (.04) $ (.06) Weighted average shares - basic and diluted 28,783,000 25,073,000
See accompanying notes to consolidated financial statements. F-5 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Stockholders' Deficit Period January 18, 1990 (Date of Commencement of Development Stage) Through December 31, 2001
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 ($.13 per share)1,625,000 1,625 201,500 - 203,125 Net Loss - - - (366,843) (366,843) F-6 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Stockholders' Deficit Period January 18, 1990 (Date of Commencement of Development Stage) Through December 31, 2001 Deficit Accumulated Additional During the Common Stock Paid In Development Shares Amount Capital Stage Total Balance, December 31, 1995 19,562,859 19,562 513,847 (748,879) (215,470) Common Stock Issued for: Cash ($.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 - 9,500 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) F-7 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Stockholders' Deficit Period January 18, 1990 (Date of Commencement of Development Stage) Through December 31, 2001 Deficit Accumulated Additional During the Common Stock Paid In Development Shares Amount Capital Stage Total Common stock issued for: Services ($.25 per share) 125,000 126 31,125 - 31,251 Services ($.23 per share) 75,000 75 17,175 - 17,250 Services ($.13 per share) 825,000 825 103,125 - 103,950 Services ($.17 per share) 50,000 50 8,500 - 8,550 Prepaid services ($.23 per share) 250,000 250 57,250 - 57,500 Commission of private placement sale of common stock in 2000 327,194 327 (327) - - Acquisition of subsidiary stock held by minority shareholders 840,195 840 (840) - - Net Loss - - - (1,037,570) (1,037,570) Balance at December 31, 2001 30,603,577 $30,604 $2,152,824 $(4,191,597)$(2,008,169)
F-8 SANGUINE CORPORATION (A Development Stage Company) Consolidated Statement of Cash Flows Years Ended December 31 2001 2000 Cumulative Amounts Cash flows from operating activities: Net loss $(1,037,570)$(1,444,616) $(4,191,597) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization - - 4,609 Common stock issued for services 161,001 429,000 1,027,802 Note payable issued for services - 699,200 699,200 Recognition of prepaid services 208,125 - 208,125 Increase (decrease) in: Accounts payable 55,703 58,165 192,549 Accrued interest payable 112,400 20,815 172,095 Accrued liabilities - 2,369 2,369 Accrued salaries 60,000 60,000 644,000 Net cash used in operating activities (440,341) (175,067) (1,240,848) Cash flows from investing activities- - - (4,609) Cash flows from financing activities: Increase (decrease) in notes payable (68,166) 70,637 170,777 Issuance of common stock - 635,320 1,097,375 Contributed capital - - 750 Net cash provided by financing activities (68,166) 705,957 1,268,902 Net (decrease) increase in cash (508,507) 530,890 23,445 Cash, beginning of period 531,952 1,062 - Cash, end of period $ 23,445 $531,952 $ 23,445
F-9 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 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 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. 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). During the year ended December 31, 2001, the Company acquired the remaining 6% of the California corporation in exchange for the issuance of 840,195 shares of common stock. Development Stage Company The Company is considered a development stage Company as defined in SFAS No. 7. The Company is devoting substantially all of its efforts to research and development and obtaining financing. Principal operations have not commenced and no significant revenues have been derived from operations since inception. 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. F-10 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 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 period. F-11 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 1. Organization and Significant Accounting Policies Continued Loss Per Share-continued The computation of diluted loss per common share is based on the weighted average number of shares outstanding during the year 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 year. Options and warrants to purchase, 2,270,209 shares of common stock at prices ranging from $.1275 to $.40 per share were outstanding at December 31, 2001 and 2000, but were not included in the diluted loss per share calculation because the effect would have been antidilutive. Reclassifications Certain amounts in the 2000 financial statements have been reclassified to conform with the presentation of the current year financial statements. 2. Going Concern As of December 31, 2001, 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. F-12 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 3. Prepaid Expense In April 2001, the Company entered into two consulting agreements in which the consultants would provide financial, general business, and strategic planning services. As compensation for one consulting agreement, the Company issued 250,000 shares of its common stock at $0.23 per share. The Company recorded $57,500 of prepaid expense and has recognized the expense ratably over the one year term of the consulting agreement. For the second consulting agreement, the Company's President transferred 1,000,000 of his personal shares of common stock in the Company as prepayment of the consulting fees. The Company recorded $220,000 of prepaid expense and a note payable to the Company's President based on the current market price of the Company's common stock of $0.22 per share (see note 4). The Company has recognized the expense ratably over the one year term of the consulting agreement. At December 31, 2001 the Company continued to carry $69,375 of prepaid expense and had recognized $208,125 of consulting expense related to these agreements. 4. Notes Payable Notes payable consist of the following as of December 31,: 2001 2000 Unsecured note payable to an officer of the Company due on demand, payable through the issuance of 1,600,000 shares of common stock as repayment for personally - held shares of the officer that were issued as payment of a Company obligation; the face value of the note is based on the market price per share on the date of transfer by the officer; interest is computed at 12% per year $699,200 $ - F-13 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 4. Notes payable continued Unsecured note payable to an officer of the Company, due on demand, payable through the issuance of 1,000,000 shares of common stock as repayment for personally-held shares of the officer that were issued as payment of a Company obligation; the face value of the note is based on the market price per share on the date of transfer by the officer; interest is computed at 12% per year 220,000 - 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 5. 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, 2001 2000 Cumulative Amounts Income tax benefit at statutory rate $387,000 $539,000 $1,640,000 F-14 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 Expiration of net operating loss carryforwards - - (247,000) Change in valuation allowance (387,000) (539,000) (1,393,000) $ - $ - $ - Deferred tax assets are comprised of the following: December 31, 2001 2000 Net operating loss carryforwards $1,153,000 $788,000 Accrued officers' salaries 240,000 218,000 Valuation allowance (1,393,000 (1,006,000) $ - $ - At December 31, 2001, the Company had net operating loss carryforwards of approximately $3,091,000. 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. A valuation allowance has been established that offsets the net deferred tax asset because there is significant uncertainty surrounding its ultimate realization. The uncertainty is caused by the Company's recurring losses and the annual limits referred to above. F-15 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 6. Related Party Transactions At December 31, 2001 and 2000, related party notes payable consist of the following: Unsecured note payable to an officer of the Company due on demand, payable through the issuance of 1,600,000 shares of common stock as repayment for personally - held shares of the officer that were issued as payment of a Company obligation. The face value of the note of $699,200 is based on the market price per share on the date of transfer by the officer. Interest is computed at 12% per year. Unsecured note payable to an officer of the Company, due on demand, payable through the issuance of 1,000,000 shares of common stock as repayment for personally-held shares of the officer that were issued as payment of a Company obligation. The face value of the note of $220,000 is based on the market price per share on the date of transfer by the officer. Interest is computed at 12% per year. Unsecured notes payable to an officer of the Company in the amount of $198,943, due on demand, with interest at 12% per year. Accrued interest on the related party notes total $166,510 and $58,941 at December 31, 2001 and 2000, respectively, while interest expense on the notes totaled $127,735 and $40,226 for the years ended December 31, 2001 and 2000, respectively. Accounts payable included amounts owed to officers of the Company as reimbursement of Company expenses paid by such officers of $192,548 and $136,845, respectively. F-16 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 7. Supplemental Cash Flow Information Actual amounts paid for interest and income taxes are as follows: Years Ended December 31, 2001 2000 Cumulative Amounts Interest $19,834 $5,171 $114,883 Income taxes $ - $ - $ - During the year ended December 31, 2001: * The Company issued 250,000 shares of common stock valued at $57,500 as pre-payment of consulting services. Such prepaid consulting services are being recognized over the term of the consulting agreement, which is 1 year. * The Company recorded a note payable of $220,000 for repayment of 1,000,000 shares of common stock personally held by an officer of the Company issued as pre-payment of consulting services for the Company. Such prepaid consulting services are being recognized over the term of the consulting agreement, which is 1 year. 8. Minority Interest Sanguine Corporation (California) had a total of 6,586,800 shares of its common stock issued and outstanding at June 14, 1993. 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 represented 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 of California. F-17 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 8. Minority Interest Continued In November 2001 Sanguine Corporation (Nevada) acquired the remaining 386,800 shares of Sanguine Corporation (California) through the issuance of 840,195 shares of common stock. As of that date, Sanguine Corporation (California) became a 100% owned subsidiary. 9. 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, 2001 is approximately as follows: Year Ending December 31, Amount 2002 21,318 2003 21,900 2004 7,364 Total future minimum rental payments $50,582 Rent expense related to operating leases was approximately $21,000 and $13,000 for the years ended December 31, 2001 and 2000, 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, 2001, 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 until January 2007. F-18 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 10. Stock Options and Warrants 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, 2006. 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. In connection with the Company's September 2000 private placement, 1,799,567 warrants to purchase the common stock were issued. The warrants are exercisable at $0.35 per share, and expire August 29, 2004. At December 31, 2001 all of the warrants remain outstanding. The following table summarized information about stock options and warrants outstanding at December 31, 2001: Outstanding Exercisable Weighted Average Weighted Weighted Range Remaining Average Average Exercise Number Contractual Exercise Number Excercisable Prices Outstanding Life Price Exercisable Price $.1275 470,642 4.7 years $.1275 470,642 $.1275 .35 1,799,567 2.7 years .35 1,799,567 .35 $.1275-.35 2,270,209 3.1 years $.30 2,270,209 $.30 11. 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. F-19 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 12. Subsequent Events On March 11, 2002, the Company entered into the following transactions: In order to engage the services of certain individuals and entities for their assistance in capital raising activities the Company entered into the following transactions: * The Company entered into an exclusive license agreement with an entity by granting the exclusive license rights to its PHER-02 product and associated processes and technologies. This entity has been granted this exclusive license for Asia, including the People's Republic of China, Thailand, Laos, Cambodia, Vietnam, Singapore, Malaysia, Indonesia, North Korea, Burma, Mongolia and Taiwan. * The Company issued three warrants to purchase an aggregate of 3,000,000 shares of the Company's common stock to individuals related to the entity that received the exclusive license rights of the Company's PHER-02 product in Asia. The warrants are exercisable at a price of $0.15 per share and expire February 21, 2005. The warrants also have a call provision, which the Company can exercise and require the holders of the warrants to exercise their warrants if at any time the Company's common stock trades for an amount equal to or greater than $1.00 per share for 10 consecutive trading days. The Company estimates the issuance of these warrants for services will result in approximately $330,000 of expenses in the first quarter of 2002. * The Company has entered into a convertible note agreement providing for the receipt of $25,000 in exchange for a 5% convertible note and warrants to purchase 5,937,500 shares of common stock at an exercise price of the greater of $0.08 or 66 2/3% of the five-day trading average of the Company's common stock. The note is convertible into common stock of the Company at the lesser of $0.08 or 66 2/3% of the five-day trading average of the Company's common stock. The Company estimates the issuance of these warrants for services will result in approximately $712,000 of expenses in the first quarter of 2002. In addtion, the beneficial conversion feature of the note is estimated to result in $25,000 in additional interest expense. In order to pay for ongoing legal services, the Company entered into the following transactions: * The Company has entered into an agreement whereby the Company has issued a warrant to an individual to acquire up to 500,000 shares of the Company's common stock for services. The exercise price of the warrant is the lower of 50% of the average bid price of the Company's common stock for the five trading days prior to the exercise of the warrant or $0.08 per share. The warrant expires March 11, 2005. The Company estimates that the issuance of these warrants for services will result in approximately $60,000 of expense in the first quarter of 2002. * The Company has entered into a convertible note agreement providing for the receipt of $3,750 of legal services in exchange for a 5% convertible note. The note is convertible into common stock of the Company at the lesser of $0.08 or 66 2/3% of the five-day trading average of the Company's common stock. F-20 SANGUINE CORPORATION (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2001 and 2000 13. Recent Accounting Pronouncements In July 2001, SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" were issued. SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. It requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. SFAS 142 is required to be applied for fiscal years beginning after December 15, 2001. Currently, the Company has no recorded goodwill and will assess how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations in any future acquisitions. The FASB recently issued FASB Statement No. 143 Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applied to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of leases. This Statement amends SFAS 19. The effective date for this Statement is June 15, 2002. Currently, the Company has no tangible long lived assets and will assess how the adoptions SFAS 143 will impact its financial position and future operations. The FASB recently issued FASB Statement No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets. The new guidance resolves significant implementation issues related to FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. Statement 144 is effective for fiscal years beginning after December 15, 2001. Management has not determined the potential impact on financial position or results of operations. F-21 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. - --------------------- The Company changed accountants, from Schvaneveldt and Company, due to the death of its former principal accountant, Darrell T. Schvaneveldt, CPA, on September 9, 2000. The new accounting firm is Tanner + Company, Inc. For additional information on the change of accountants, see the Company's 8-K Current Report dated September 18, 2000, which is incorporated herein by reference. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. - -------------------------------------------------- Identification of Directors and Executive Officers. - --------------------------------------------------- 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., MBA 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 6/01 Merton Dick Van Orden Director 10/00 6/01 David E. Nelson, CPA Director 3/96 * 20 Chief Financial 3/96 * Officer Edward L. Kunkel, Esq. Director 4/94 * * These persons presently serve in the capacities indicated.
Term of Office. - --------------- The terms of office of the current directors shall continue until the annual meeting of stockholders, which has been scheduled by the Board of Directors to be held in June of each year. The annual meeting of the Board of Directors immediately follows the annual meeting of stockholders, at which executive officers for the coming year are elected. 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 6/01 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. Joseph P. O'Malley, M.D. Member 6/01 *
Business Experience. - -------------------- Thomas C. Drees, Ph.D., MBA, Chairman, President, CEO and a Director. Dr. Drees, age 73, 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 29 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 21 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 74 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. David E. Nelson, CPA, Chief Financial Officer and Director. Mr. Nelson, age 58, 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 54 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 59 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. William Regelson, M.D., Advisory Board Member, is 76 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- 22 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 60 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 61 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. Joseph P. O'Malley, M.D., Advisory Board Member, is 70 years of age. Mr. O'Malley graduated from Harvard Medical School, cum laude, served 25 years with the National Institute of Health and the Federal Drug Administration and 15 years with the American Red Cross as Regulatory Head of blood services. Family Relationships. - --------------------- There are no family relationships between any of our directors or executive officers. Involvement in Certain Legal Proceedings. - ----------------------------------------- 23 During the past five years, none of our present or former directors, executive officers or persons nominated to become directors or executive officers: (1) Filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; (2) Was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his involvement in any type of business, securities or banking activities; (4) Was found by a court of competent jurisdiction in a civil action, by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated. Item 10. 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 - ----------------------------------------------------------------- 24 Thomas C. Drees, Ph.D,12/31/01 * 0 0 0 0 0 0 MBA, CEO, 12/31/00 * 0 0 0 0 0 0 President and Chairman of the Board Anthony G. Hargreaves, 12/31/01 72000 0 0 0 0 0 0 Vice Pres., 12/31/00 24000 0 0 300000 0 0 0 Sec./Tres. and Director David E. Nelson, CPA 12/31/01 0 0 0 0 0 0 0 CFO and 12/31/00 0 0 0 100000 0 0 0 Director Edward L. Kunkel, Esq.12/31/01 0 0 0 0 0 0 0 Director 12/31/00 0 0 0 0 0 0 0 Merton Dick 12/31/01 0 0 0 50000 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. Bonuses and Deferred Compensation. - ---------------------------------- See the heading "Employment Contracts and Termination of Employment and Change-in-Control Arrangements" below. Compensation Pursuant to Plans. - ------------------------------- None. Pension Table. - -------------- None; not applicable. 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. 25 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 shares of "restricted securities" 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, while serving on the Advisory Board, Merton Dick Van Orden were to 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 was 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 to pursue other activities on June 1, 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, 2007. 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 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, 2000, a total of $584,000 in salaries had accrued; and as of December 31, 2001, a total of $644,000 in salaries had accrued; Mr. Hargreaves was paid $24,000 during fiscal 2000; and $72,000 in fiscal 2001. On June 10, 2000, 300,000 shares of common stock were issued to Mr. 26 Hargreaves for additional services valued at $75,000. These shares were registered on Form S-8 of the Securities and Exchange Commission and were subject to lock-up conditions prohibiting their public resale until May 7, 2001. 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 Report, 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 Report, 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:
Date Report Date Report Filer Transaction Due Filed - ----- ----------- --- ----- Thomas C. Drees Disposition of 4/01 6/12/01 Ph.D. 1,000,000 shares
Item 11. Security Ownership of Certain Beneficial Owners and Management. --------------------------------------------------------------- 27 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 Report: DIRECTORS AND EXECUTIVE OFFICERS --------------------------------
Number of Shares Percent Name and Address Beneficially Owned of Class (1) - ---------------- ------------------ -------- Thomas C. Drees, Ph.D., MBA 9,289,133 27.9% 101 East Green Street, #11 Pasadena, California 91105 Anthony G. Hargreaves 1,701,979 5.1% 101 East Green Street, #11 Pasadena, California 91105 David E. Nelson, CPA 150 .0% 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 (five persons) 11,151,262 33.5%
FIVE PERCENT STOCKHOLDERS -------------------------
Number of Shares Percent Name and Address Beneficially Owned of Class * - ---------------- ------------------ -------- Thomas C. Drees, Ph.D., MBA 9,389,133 27.9% 101 East Green Street, #11 Pasadena, California 91105 Anthony G. Hargreaves 1,701,979 5.1% 101 East Green Street, #11 Pasadena, California 91105 __________ ______ Total of all five percent 11,091,112 33.3% stockholders 28
* Based upon 30,723,607 shares of outstanding common stock, and assumes that the following shares of common stock underlying options or 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; and 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. 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. Item 12. Certain Relationships and Related Transactions. ----------------------------------------------- Transactions with Management and Others. - ---------------------------------------- Except as outlined under the caption "Executive Compensation," 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. Certain Business Relationships. - ------------------------------- Except as outlined under the caption "Executive Compensation," 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. Indebtedness of Management. - --------------------------- Except as outlined under the caption "Executive Compensation," 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 29 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. Parents of the Issuer. - ---------------------- Except and to the extent that Dr. Drees may be deemed to be a parent of the Company by virtue of his substantial stock ownership, the Company has no parents. Transactions with Promoters. - ---------------------------- Except as outlined under the caption "Executive Compensation," 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. Item 13. Exhibits and Reports on Form 8-K. --------------------------------- Reports on Form 8-K Exhibits* (i) Where Incorporated in this Report -------------- Registration Statement on SB-2, as Parts I, II and III amended.** 8-K Current Report dated June 8, 2000, Part I respecting the Westbury Warrant Agreement.** 8-KA-1 Current Report dated June 8, 2000, Part I respecting the Westbury Warrant Agreement** 8-KA-2 Current Report dated June 8, 2000, Part I respecting the Westbury Warrant Agreement.** 8-K Current Report dated September 1, 2000, Part I respecting the Laidlaw Private Offering.** 8-K Current Report dated September 18, 2000, Part II respecting the change in accountants.** 30 8-K Current Report dated January 19, 2001, Part I respecting the IriSys Service Agreement.** S-8 Registration Statement filed with the Part I Securities and Exchange Commission on December 17, 2001** 8-K Current Report dated September 26, 2001, Part I respecting the acquisition of Sanguine California** 8-K Current Report dated March 11, 2002, Part I respecting various matters** (ii) Exhibit Number Description - ------ ----------- 21 Subsidiaries of the Company * Summaries of all exhibits contained within this Report are modified in their entirety by reference to these Exhibits. ** These documents and related exhibits have been previously filed with the Securities and Exchange Commission and are incorporated herein by reference. 31 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated: SANGUINE CORPORATION Date: April 5, 2002 By /s/ Thomas C. Drees ------------- ------------------------------------- Thomas C. Drees, Ph.D., MBA CEO, President and Chairman of the Board of Directors Date: April 4, 2002 By /s/ Anthony G. Hargreaves ------------- ------------------------------------- Anthony G. Hargreaves, Vice President, Secretary/Treasurer and Director Date: April 8, 2002 By /s/ David E. Nelson ------------- ------------------------------------- David E. Nelson, CPA CFO and Director 32 EX-21 3 ex-21.txt SUBSIDIARIES OF THE COMPANY Sanguine Corporation, a California corporation, which was merged with and into as and ceased being a 94%-owned subsidiary in September, 2001. -----END PRIVACY-ENHANCED MESSAGE-----