10QSB 1 q302.txt 10-QSB FOR THE QUARTER ENDED MARCH 31, 2002 U. S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- --------------- Commission File No. 0-24480 SANGUINE CORPORATION -------------------- (Name of Small Business Issuer in its Charter) NEVADA 95-4347608 ------ ---------- (State or Other Jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) 101 East Green Street, #11 Pasadena, California 91105 --------------------------- (Address of Principal Executive Offices) Issuer's Telephone Number: (626) 405-0079 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No (2) Yes X No --- --- --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Not applicable. APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: March 31, 2002 30,653,577 ---------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The Financial Statements of the Registrant required to be filed with this 10-QSB Quarterly Report were prepared by management, and commence on the following page, together with Related Notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant. SANGUINE CORPORATION (A Development Stage Company) Index to Financial Statements Page Balance sheet, March 31, 2002 (unaudited) F-1 Statement of operations for the three months ended March 31, 2002 and 2001 (unaudited) and for the period from January 18, 1989 (date of inception) to March 31, 2002 (unaudited) F-2 Statement of cash flows for the three months ended March 31, 2002 and 2001 (unaudited) and for the period from January 18, 1989 (date of inception) to March 31, 2002 (unaudited) F-3 Notes to financial statements F-5 SANGUINE CORPORATION (A Development Stage Company) Balance Sheet March 31, 2002 (Unaudited) Assets Current assets: Cash $ 7,575 -------- Total assets $ 7,575 ======== Liabilities and Stockholders' Deficit Current liabilities: Related party accounts payable $202,101 Accrued salaries 659,000 Accrued interest payable 205,759 Other accrued expenses 61,795 Notes payable 1,118,727 ---------- Total current liabilities 2,247,382 ---------- Stockholders' deficit: Common stock - par value $.001 per share. Authorized 100,000,000 shares; issued and outstanding 30,653,577 shares 30,654 Additional paid-in capital 3,320,851 Deficit accumulated during the development stage (5,591,312) ---------- Total stockholders' deficit (2,239,807) ---------- Total liabilities and stockholders' deficit $ 7,575 ==========
See accompanying notes to financial statements. F-1 SANGUINE CORPORATION (A Development Stage Company) Statement of Operations (Unaudited)
Cumulative Three Months Ended Amounts March 31, From 2002 2001 Inception Revenue $ - $ - $ 150,000 Research and development (50,400) (64,202) (1,197,980) Consulting (1,151,202) (18,750) (2,186,847) General and administrative expenses (139,454) (80,697) (2,061,745) ---------- -------- ---------- Loss from operations (1,341,056) (163,649) (5,296,572) Other income (expense) Interest income 4 6,963 27,457 Interest expense (58,663) (28,358) (322,197) ---------- -------- ---------- Loss before benefit for income taxes (1,399,715) (185,044) (5,591,312) Benefit for income taxes - - - ---------- -------- ---------- Net loss $(1,399,715) $(185,044)$(5,591,312) ========== ======== ========== Loss per share $ (.05) $ (.01) ========== ======== Weighted average number of shares outstanding 30,640,000 28,143,000 ========== ==========
See accompanying notes to financial statements. F-2 SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited)
Cumulative Three Months Ended Amounts March 31, From 2002 2001 Inception Cash flows from operating activities: Net loss $(1,399,715) $(185,044) $(5,591,312) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation - - 4,609 Common stock issued for services 5,400 18,751 1,033,203 Warrants and options issued for services 1,133,927 - 1,133,927 Interest on beneficial conversion feature 25,000 - 25,000 Legal expense related to beneficial conversion feature 3,750 - 3,570 Note payable issued for services 25,000 - 724,200 Recognition of prepaid services 69,375 - 277,500 Increase (decrease) in: Accounts payable 9,553 12,726 202,101 Accrued interest payable 33,664 22,556 205,759 Accrued liabilities 59,426 - 61,795 Accrued salaries 15,000 15,000 659,000 --------- --------- ----------- Net cash used in operating activities (19,620) (116,011) (1,260,468) --------- --------- ----------- Cash flows from investing activities - - (4,609) --------- --------- ----------- Cash flows from financing activities: Net (payments on) proceeds from notes payable 3,750 (18,198) 174,527 Sales of common stock - - 1,097,375 Contributed capital - - 750 --------- --------- ----------- Net cash (used in) provided by financing activities 3,750 (18,198) 1,272,652 --------- --------- ----------- Net increase (decrease) in cash (15,870) (134,209) 7,575 Cash, beginning of period 23,445 531,952 - --------- --------- ----------- Cash, end of period $ 7,575 $ 397,743 $ 7,575 ========= ========= ===========
See accompanying notes to financial statements. F-3 SANGUINE CORPORATION (A Development Stage Company) Statement of Cash Flows (Unaudited) Continued
Cumulative Three Months Ended Amounts March 31, From 2002 2001 Inception Supplemental disclosure of cash flow information: Interest paid $ 25,000 $5,802 $139,883 ========= ====== ======== Income taxes paid $ - $ - $ - ========= ====== ========
See accompanying notes to financial statements. F-4 SANGUINE CORPORATION (A Development Stage Company) Notes to Financial Statements March 31, 2002 1. Statement Preparation The Company has prepared the accompanying financial statements with interim financial reporting requirements promulgated by the Securities and Exchange Commission. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2001 Annual Report on Form 10-KSB. The results of operations for the period ended March 31, 2002 are not necessarily indicative of the operating results for the full year. 2. Earnings Per Share The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is antidilutive. F-5 Item 2. Management's Discussion and Analysis or Plan of Operation. -------------------------------------------------------------------- Plan of Operation. ------------------ 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 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; * 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. In March, 2002, we granted an Exclusive License Agreement for parts of Asia and South America regarding PHER-02 and related technology and patents to Ascendiant-Asia LLC and Ascendiant-South America LLC. Our ability to carry out our plan depends entirely upon our ability to obtain additional substantial equity, debt financing or royalties. We cannot assure you that we will receive this financing, and except for the possibility of receiving funds from the exercise of our 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. ---------------------- During the quarterly period ending March 31, 2002, we received total revenues of $0 and sustained a net loss of ($1,399,715), as compared with the quarterly period ended March 31, 2001, when we received total revenue of $0 and sustained a net loss of ($185,044). The significant increase in net loss was due mainly to warrants to purchase common stock granted to consultants for services as disclosed in the Company's Form 10-KSB filed on April 10, 2002. Liquidity. ---------- As of March 31, 2002, we had $7,575 in cash with $2,247,382 in current liabilities. The Company currently has an S-3 Registration Statement covering potential revenues for current and intended operations for the near foreseeable future. Funds may come from the exercise of outstanding warrants that are presently the subject of an effective S-3 Registration Statement or through other debt or equity financing with members of management or others. Forward Looking Statements. --------------------------- Statements made in this Form 10-QSB which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and of our business, including, without limitation, (i) our ability to gain a larger share of the synthetic blood industry, our ability to continue to develop products acceptable to the industry, our ability to retain relationships with suppliers and distributors, our ability to raise capital, and the growth of the synthetic blood industry, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions. Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in our reports on file with the SEC: general economic or industry conditions, nationally and/or in the communities in which we conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, changes in the synthetic blood industry, the development of products and that may be superior to the products and services offered by us, demand for synthetic blood products, competition, changes in the quality or composition of our products and services, our ability to develop new products and services, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our operations, products, services and prices. Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements. PART II - OTHER INFORMATION Item 1. Legal Proceedings. ---------------------------- None; not applicable. Item 2. Changes in Securities and Use of Proceeds. --------------------------------------------------- None; not applicable. Item 3. Defaults Upon Senior Securities. ------------------------------------------ None; not applicable. Item 4. Submission of Matters to a Vote of Security Holders. -------------------------------------------------------------- None; not applicable. Item 5. Other Information. ---------------------------- None; not applicable. Item 6. Exhibits and Reports on Form 8-K. ------------------------------------------- (a) Exhibits. Form 10-KSB Annual Report for the Year ended December 31, 2001.* (b) Reports on Form 8-K. 8-K Current Report dated March 11, 2002, as amended.* * Incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned there unto duly authorized. SANGUINE CORPORATION Date: 5/14/02 By:/s/Thomas C. Drees, Ph.D. --------- ------------------------------------- Thomas C. Drees, CEO, President and Chairman of the Board of Directors Date: 5/14/02 By:/s/Anthony G. Hargreaves --------- ------------------------------------- Anthony G. Hargreaves Vice President, Secretary/ Treasurer Director Date: 5/14/02 By:/s/David E. Nelson --------- ------------------------------------- David E. Nelson CFO and Director