10QSB 1 q306.txt QUARTERLY REPORT ON FORM 10QSB FOR THE PERIOD ENDED MARCH 31, 2006 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, 2006 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- --------------- Commission File No. 000-24480 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, #6 Pasadena, California 91105 --------------------------- (Address of Principal Executive Offices) Issuer's Telephone Number: (626) 405-0079 Indicate by check mark whether the Issuer (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 Issuer 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 --- --- Indicate by check mark whether the Issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X 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 Issuer's classes of common stock, as of the latest practicable date: March 31, 2006 - 80,708,658 shares of common stock. Transitional small business disclosure format (check one): Yes No X --- --- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The Financial Statements of the Company 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 Company. SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) CONSOLIDATED FINANCIAL STATEMENTS March 31, 2006 and December 31, 2005 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Consolidated Balance Sheets ASSETS March 31, December 31, 2006 2005 (Unaudited) CURRENT ASSETS Cash $ 77,747 $ 159,466 ------------- ---------- 77,747 159,466 PROPERTY AND EQUIPMENT, NET 1,193 1,267 ------------- ---------- TOTAL ASSETS $ 78,940 $ 160,733 ============= ========== The accompanying notes are an integral part of these consolidated financial statements. F-2 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Consolidated Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' DEFICIT March 31, December 31, 2006 2005 (Unaudited) CURRENT LIABILITIES Related party payable $ 4,000 $ 4,000 Accounts payable 37,760 63,493 Accrued compensation 43,813 21,313 ----------- ----------- Total Current Liabilities 85,573 88,806 ----------- ----------- STOCKHOLDERS' DEFICIT Common stock: 200,000,000 shares authorized of $.001 par value, 80,708,658 shares issued and outstanding 80,709 80,709 Additional paid-in capital 5,710,086 5,710,086 Accumulated deficit during the development stage (5,797,428) (5,718,868) ----------- ----------- Total Stockholders' Deficit (6,633) 71,927 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 78,940 $ 160,733 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. F-3 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Consolidated Statements of Operations (Unaudited) From Inception of the Development Stage on January 18, For the Three Months Ended 1990 Through March 31, March 31, 2006 2005 2006 REVENUE $ 5,064 $ 1,019 $ 181,263 --------- ----------- ------------ OPERATING EXPENSES Professional Fees 15,931 18,052 2,757,385 Research and Development 34,909 - 1,573,125 Selling, general and administrative 33,748 21,474 2,505,901 --------- ----------- ------------ Total Operating Expenses 84,588 39,526 6,836,411 --------- ----------- ------------ LOSS FROM OPERATIONS (79,524) (38,507) (6,655,148) --------- ----------- ------------ OTHER INCOME (EXPENSE) Interest income 964 1,871 38,299 Interest expense - - (667,466) Loss on cash deposit - - (10,020) Gain on settlement of debt - - 1,496,907 --------- ----------- ------------ Total Other Income (Expense) 964 1,871 857,720 --------- ----------- ------------ NET LOSS $ (78,560) $ (36,636) $ (5,797,428) ========= =========== ============ BASIC LOSS PER SHARE $ (0.00) $ (0.00) ========= =========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 80,708,658 78,826,113 ========== =========== The accompanying notes are an integral part of these consolidated financial statements. F-4 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited) From Inception of the Development Stage on January 18, For the Three Months Ended 1990, Through March 31, March 31, 2006 2005 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (78,560) $ (36,636) $(5,797,428) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 74 25 4,907 Common stock issued for services - - 2,515,337 Stock warrants granted 8,650 Interest on beneficial conversion feature - - 25,000 Legal expense related to beneficial conversion feature - - 3,750 Note payable issued for services - - 727,950 Gain on extinguishments of debt - - (98,826) Gain on conversions of debt to equity - - (1,398,081) Recognition of prepaid expenses and expenses prepaid with common stock - - 456,184 Changes in assets and liabilities: Increase in accounts payable and related party payables (25,733) (11,370) 365,948 Increase in accrued interest payable - - 547,279 Increase in accrued liabilities - 10,125 10,125 Increase in customer deposits` - - 45,000 Increase in accrued salaries 22,500 - 877,688 --------- ---------- ------------ Net Cash Used by Operating Activities (81,719) (37,856) (1,706,517) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for fixed assets - (1,491) (6,100) --------- ---------- ------------ Net Cash Used by Investing Activities - (1,491) (6,100) --------- ---------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from warrant conversion - 72,795 424,700 Proceeds from notes payable and notes payable-related party - - 212,139 Payments on notes payable and notes payable-related party - - (9,400) Proceeds from issuance of convertible debentures - - 40,000 Contributed capital - - 750 Common stock issued for cash - - 1,122,175 --------- ---------- ------------ Net Cash Provided by Financing Activities - 72,795 1,790,364 --------- ---------- ------------ NET INCREASE (DECREASE) IN CASH (81,719) 33,448 77,747 CASH AT BEGINNING OF PERIOD 159,466 304,103 - --------- ---------- ------------ CASH AT END OF PERIOD $ 77,747 $ 337,551 $ 77,747 ========= ========== ============ The accompanying notes are an integral part of these consolidated financial statements. F-5 SANGUINE CORPORATION AND SUBSIDIARY (A Development Stage Company) Consolidated Statements of Cash Flows (Continued) (Unaudited) From Inception of the Development Stage on January 18, For the Three Months Ended 1990, Through March 31, March 31, 2006 2005 2006 SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES CASH PAID FOR: Interest $ - $ - $ - Income taxes $ - $ - $ - NON-CASH FINANCING ACTIVITIES Conversion stock issued for debt conversion $ - $ 9,600 $ 9,600 Equity instruments issued for services rendered $ - $ - $2,515,337 Interest on beneficial conversion feature $ - $ - $ 25,000 Legal related to beneficial conversion feature $ - $ - $ 3,750 Notes payable issued for services $ - $ - $ 727,950 Common stock issued for prepaid services $ - $ - $ 236,284 Common stock issued for debt $ - $ - $2,822,067 F-6 The accompanying notes are an integral part of these consolidated financial statements. SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Notes to Consolidated Financial Statements March 31, 2006 and December 31, 2005 NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's most recent audited financial statements and notes thereto included in its December 31, 2005 Annual Report on Form 10-KSB. Operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. NOTE 2 - NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123 )") which requires the measurement and recognition of compensation expense for all share-based payments to employees and directors including employee stock options and stock purchases related to the Company's employee stock option and award plans based on estimated fair values. SFAS 123 ) supersedes the Company's previous accounting under Accounting Principles Board Option No. 25, "Accounting for Stock Issued to Employees" ("APB25") for periods beginning in fiscal 2006. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 ("SAB 107") relating to SFAS 123 ). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123R. The Company adopted SFAS 123 ) using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of the Company's fiscal year 2006. The Company's financial statements as of and for the three month period ended March 31, 2006 reflect the impact of SFAS 123 ). In accordance with the modified prospective transition method, the Company's financial statements for the prior year have not been restated to reflect, and do not include, the impact of SFAS 123 ). There was no stock-based compensation expense related to employee stock options and employee stock purchases recognized during the three month period ended March 31, 2006. SFAS 123 ) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's Statement of Operations. Prior to the adoption of SFAS 123 ), the Company accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with APB 25 as allowed under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" F-7 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Notes to Consolidated Financial Statements March 31, 2006 and December 31, 2005 NOTE 2 - NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS (continued) ("SFAS 123"). Under the intrinsic value method, no stock-based compensation expense had been recognized in the Company's Statement of Operations, because the exercise price of the Company's stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period using the Black Scholes method. At December 31, 2005, the Company had no unvested share-based payment awards for which compensation expense should be recognized during the three month period ended March 31, 2006. Stock-based compensation expense recognized in the Company's Statement of Operations for the three month period ended March 31, 2006 only includes compensation expense for share-based payment awards granted, but not yet vested after January 1, 2006, and is based on the grant date fair value estimated in accordance with SFAS 123 ). Stock-based compensation expense recognized in the Company's Statement of Operation for the three month period ended March 31, 2006 assumes all awards will vest, therefore no reduction has been made for estimated forfeitures. NOTE 3 - GOING CONCERN The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The Company's management has taken certain steps to maintain its operating and financial requirements in an effort to continue as a going concern until such time as revenues are sufficient to cover expenses. Future plans include a debt or equity offering for between $1,000,000 - $1,500,000 that should enable the Company to complete the animal testing stage for FDA approval of its product. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. F-8 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Notes to Consolidated Financial Statements March 31, 2006 and December 31, 2005 NOTE 4 - STOCK WARRANTS A summary of the status of the Company's outstanding stock options as of March 31, 2006 and December 31, 2005 and changes during the periods then ended is presented below: Outstanding Exercisable Weighted Number Average Number Outstanding Remaining Exercisable Range of at March Contractual at March Exercise Prices 31, 2006 Life 31, 2006 $ 0.1275 470,642 .40 470,642 0.08 2,193,115 .90 2,193,115 0.125 150,000 .70 150,000 0.28 30,000 1.90 30,000 ---------- ---------- 2,843,757 2,843,757 ========== ========== NOTE 5 - RELATED PARTY TRANSACTION During the quarter ended March 31, 2006, there was a balance of $4,000 on related party notes payable. F-9 Item 2. Management's Discussion and Analysis or Plan of Operation. -------------------------------------------------------------------- Plan of Operation. ------------------ General. -------- We have not commenced planned principal operations, but have made good progress since the end of fiscal 2001, in formulation and stability testing. In January, 2001, we were successful in developing improved formulations of our surfactants for PHER-02. 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 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 have performed 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 not to exceed $500,000, divided as follows: Completed surfactant formulation (done) and the manufacture of sufficient product for initial testing, (done); animal safety and efficacy trials through a sub-contractor, (done); and administrative, patent and proprietary right protection and marketing costs, $400,000 (in process). Stage B (approximately one year [in process): In the second year, we intend to prepare New Drug Applications for FDA and selected foreign governmental approvals. 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 33 years' experience in the blood industry with Abbott Scientific, Alpha Therapeutics and Sanguine Corporation. Our plan of operation for the next 12 months is to complete the preparation and submission of the U.S. FDA Investigational New Drug Application (IND) to support PHER-02 as a synthetic oxygen carrying product or blood substitute; which will include: * A Gap Analysis for the U.S. IND, meaning a Non-clinical Assessment, a Clinical Assessment and a Chemistry, Manufacturing and Controls Assessment (CMC), preparation for an attendance at a Pre-IND meeting with the FDA, and preparation of a pre-IND briefing document to determine our progress towards the U.S. IND, with the aid and assistance of Beckloff Associates, Inc., a Cardinal Health company of Overland Park, Kansas ("Beckloff"); and * A Clinical Program and Study Design(s), meaning clinical experts will be utilized for assessment as well as attendance in the Pre-IND meeting, (if requested, with the aid and assistance of Beckloff. In March, 2006, our Board of Directors resolved to offer for sale in a private placement 20,000,000 shares of our common stock that are "restricted securities" as defined in Rule 144 of the Securities and Exchange Commission for $0.07 per share to "accredited investors" only, as that term is defined in Rule 501 of Regulation D. The anticipated aggregate gross proceeds of $1,400,000 will be utilized by us to fund the FDA required animal studies of our synthetic red cell blood product, PHER-02, for use in the transportation of pancreas islet cells in the treatment of diabetes and for other purposes. We are in the process of preparing the necessary documentation to commence this offering. No assurance can be given that we will be successful in raising these funds; and if we are unable to complete this funding, our continuing process to obtain FDA approval for the use of our product will be severely reduced and delayed. 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 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. ---------------------- Revenues for the quarters ending March 31, 2006, and 2005, were $5,064 and $1,019, respectively. We had no material operations, except the research and development activities related to our subcontracted research and development of our product, PHER-O2. We realized a net loss of $78,560 for the quarter ended March 31, 2006, and $36,636, the quarter ended March 31, 2006. Most of our expense related to the value of equity securities issued by us for services rendered. Our research and development expenses were $34,909 in the three months ended March 31, 2006, compared to $0 in the three months ended March 31, 2005. The decrease in 2005 was principally the result of our limited capital resources. Liquidity. ---------- As of March 31, 2006, we had $77,747 in cash, with $85,573 in current liabilities. During the quarter ended March 31, 2006, we had net expenses of $84,588, while receiving $5,064 in revenues. We received $1,019 in revenues, and had total expenses of $39,526 during the quarter ended March 31, 2005. Most of these expenses related to the value of equity securities issued by us for services rendered. Cash resources at March 31, 2006, and December 31, 2005, were $77,747 and $159,466, respectively. A portion of out liquidity during 2005 was provided by warrant exercises that resulted in the issuance of 1,193,254 shares for aggregate gross proceeds of $95,410. In March, 2006, our Board of Directors resolved to offer for sale in a private placement 20,000,000 shares of our common stock that are "restricted securities" as defined in Rule 144 of the Securities and Exchange Commission for $0.07 per share to "accredited investors" only, as that term is defined in Rule 501 of Regulation D. The anticipated aggregate gross proceeds of $1,400,000 will be utilized by us to fund the FDA required animal studies of our synthetic red cell blood product, PHER-02, for use in the transportation of pancreas islet cells in the treatment of diabetes and for other purposes. We are in the process of preparing the necessary documentation to commence this offering. No assurance can be given that we will be successful in raising these funds; and if we are unable to complete this funding, our continuing process to obtain FDA approval for the use of our product will be severely reduced and delayed. Forward Looking Statements. --------------------------- Statements made in this Form 10-OSB Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, and future performance 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 Securities and Exchange Commission; 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. Item 3. Controls and Procedures. -------------------------------- As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures are effectively designed to ensure that information required to be disclosed or filed by us is recorded, processed or summarized, within the time periods specified in the rules and regulations of the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls over financial reporting, and there have been no changes in our internal controls or in other factors in the last fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings. ---------------------------- None; not applicable. Item 2. Unregistered sales of Equity 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. ------------------- Exhibits. Form 10-KSB Annual Report for the Year ended December 31, 2005.* 31.1 302 Certification of Thomas C. Drees 31.2 302 Certification of David E. Nelson 32 Section 906 Certification. * Incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned there unto duly authorized. SANGUINE CORPORATION Date: 5/10/2006 By:/s/Thomas C. Drees ----------- ------------------------------------- Thomas C. Drees, Ph.D., CEO, President and Chairman of the Board of Directors Date: 5/10/2006 By:/s/David E. Nelson ----------- ------------------------------------- David E. Nelson CFO and Director