10QSB/A 1 q606a.txt AMENDED QUARTERLY REPORT ON FORM 10QSB/A-1 FOR THE QUARTER ENDED JUNE 30, 2006 U. S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB/A-1 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 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: October 4, 2006 - 81,683,658 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 June 30, 2006 and December 31, 2005 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Consolidated Balance Sheets ASSETS June 30, December 31, 2006 2005 (Unaudited) (Restated) (Restated) CURRENT ASSETS Cash $ 53,322 $ 159,466 ------------- ---------- 53,322 159,466 PROPERTY AND EQUIPMENT, NET (Note 1) 1,118 1,267 ------------- ---------- TOTAL ASSETS $ 54,440 $ 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' EQUITY (DEFICIT) June 30, December 31, 2006 2005 (Unaudited) (Restated) (Restated) CURRENT LIABILITIES Related party payable $ 4,000 $ 4,000 Accounts payable 111,655 63,493 Warrant liability 38,906 21,328 Accrued compensation 43,125 21,313 ----------- ----------- Total Current Liabilities 197,686 110,134 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIT Common stock: 200,000,000 shares authorized of $.001 par value, 81,283,658 and 80,708,658 shares outstanding, respectively 81,284 80,709 Additional paid-in capital 5,773,323 5,710,086 Accumulated deficit during the development stage(5,997,853) (5,740,196) ----------- ----------- Total Stockholders' Equity (Deficit) (143,246) 50,599 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 54,440 $ 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 For the Three For the Six January 18, Months Ended Months Ended 1990 Through June 30, June 30, June 30, 2006 2005 2006 2005 2006 (Restated)(Restated)(Restated)(Restated)(Restated) REVENUE $ 500 $ - $ 5,563 $ 1,019 $ 181,763 --------- -------- --------- -------- ----------- OPERATING EXPENSES Professional Fees 13,967 73,358 29,898 91,410 2,771,352 Research and Development 100,269 - 135,178 - 1,673,395 Selling, general and administrative 75,836 10,691 99,631 24,111 2,593,112 --------- -------- --------- -------- ----------- Total Operating Expenses190,072 84,249 264,707 115,521 7,037,859 --------- -------- --------- -------- ----------- LOSS FROM OPERATIONS (189,572) (84,249) (259,144)(114,502)(6,856,096) --------- -------- --------- -------- ----------- OTHER INCOME (EXPENSES) Interest income 523 2,767 1,487 4,638 38,822 Interest expense - - - - (667,466) Loss on cash deposit - - - - (10,020) Gain (Loss) on settlement of debt - - - - 1,496,907 --------- -------- --------- -------- ----------- Total Other Income (Expense) 523 2,767 1,487 4,638 858,243 --------- -------- --------- -------- ----------- NET LOSS $(189,049) $(81,482) $(257,657)$(109,964) $(5,997,853) ========= ======== ========= ======== =========== BASIC LOSS PER SHARE $ (0.00)$ (0.00) $ (0.00)$ (0.00) ========= ======== ========= ======== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 81,040,325 80,330,546 80,885,649 80,092,320 ========== ========== ========== ========== 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 Six Months Ended 1990, Through June 30, June 30, 2006 2005 2006 (Restated) (Restated) (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(257,657) $ (109,864) $(5,997,853) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 149 50 4,982 Common stock issued for services 43,812 46,125 2,559,149 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 48,162 921 439,843 Increase in accrued interest payable - - 547,279 Increase in accrued liabilities - - 10,125 Increase in warrant liability 17,578 (38,747) 38,906 Increase in customer deposits` - - 45,000 Increase in accrued salaries 21,812 (3,750) 877,000 --------- ---------- ------------ Net Cash Used by Operating Activities (126,144) (105,265) (1,750,942) --------- ---------- ------------ 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 20,000 95,410 444,700 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 20,000 95,410 1,810,364 --------- ---------- ------------ NET INCREASE (DECREASE) IN CASH (106,144) (11,346) 53,322 CASH AT BEGINNING OF PERIOD 159,466 304,103 - --------- ---------- ------------ CASH AT END OF PERIOD $ 53,322 $ 292,757 $ 53,322 ========= ========== ============ 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 Six Months Ended 1990, Through June 30, June 30, 2006 2005 2006 (Restated) (Restated) (Restated) SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES CASH PAID FOR: Interest $ - $ - $ - Income taxes $ - $ - $ - NON-CASH FINANCING AND INVESTING ACTIVITIES Conversion stock issued for debt conversion $ - $ 9,600 $ 9,600 Equity instruments issued for services rendered $ 43,812 $ 46,125 $2,559,149 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 Interest on beneficial conversion feature $ - $ - $ 25,000 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 June 30, 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 and six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. NOTE 2 - 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-7 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 and December 31, 2005 NOTE 3 - STOCK OPTIONS AND WARRANTS A summary of the status of the Company's outstanding stock options as of June 30, 2006 and December 31, 2005 and changes during the periods then ended is presented below: 2006 2005 Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price Outstanding, beginning of year 2,843,757 $0.15 8,756,578 $0.15 Granted - - 80,000 0.10 Expired/Cancelled - - (4,799,567) 0.21 Exercised (250,000) 0.08 (1,193,254) 0.08 --------- ----- ---------- ----- Outstanding end of year 2,593,757 $0.15 2,843,757 $0.09 --------- ----- ---------- ----- Exercisable 2,843,757 $0.15 2,843,757 $0.09 --------- ----- ---------- ----- Outstanding Exercisable Weighted Number Average Number Outstanding Remaining Exercisable Range of at June Contractual at June Exercise Prices 30, 2006 Life 30, 2006 $ 0.1275 470,642 .1 470,642 0.08 1,943,115 .60 1,943,115 0.125 150,000 .40 150,000 0.28 30,000 1.60 30,000 ---------- ---------- 2,593,757 2,593,757 ========== ========== NOTE 4 - RELATED PARTY TRANSACTION During the quarter ended June 30, 2006, there was a balance of $4,000 on related party notes payable. F-8 SANGUINE CORPORATION & SUBSIDIARY (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2006 and December 31, 2005 NOTE 6 - CORRECTION OF AN ERROR Subsequent to the filing of our Form 10QSB for the year ended June 30, 2006, the Company determined it should have accounted for the potential risk of being unable to issue registered common stock for the warrants if they are exercised. Under the Subscription Agreement, if the Company is unable to issue the common stock when the warrants are exercised, it is required to pay the holders of the warrants a sum equal to the closing price of the common stock on the trading date immediately preceding the date notice is given for exercise of the warrants, less the purchase price. A substantial number of the original warrants have been exercised and the related shares issued. The Company has determined the risk of this liability occurring relating to the remaining warrants outstanding to be 10 percent and has booked a liability accordingly. The effect of the restatement is as follows: Consolidated Statement of Operations for the six months ended June 30, 2006 As Reported As Adjusted Effect of Change Revenues $ 5,563 $ 5,563 $ - Expenses 247,129 264,707 (17,578) --------- --------- --------- Loss from operations $(241,566) $(259,144) $ (17,578) ========= ========= ========= Consolidated Statement of Operations for the year ended December 31, 2005 As Reported As Adjusted Effect of Change Revenues $ 1,019 $ 1,019 $ - Expenses 391,045 348,032 (43,013) --------- --------- --------- Loss from operations $(390,026) $(347,013) $ (43,013) ========= ========= ========= Consolidated Statement of Operations for the six months ended June 30, 2005 As Reported As Adjusted Effect of Change Revenues $ 1,019 $ 1,019 $ - Expenses 154,268 115,521 (38,747) --------- --------- --------- Loss from operations $(153,249) $(114,502) $ (38,747) ========= ========= ========= Consolidated Balance Sheet as of June 30, 2006 As Reported As Adjusted Effect of Change Current liabilities $ 158,780 $ 197,686 $ 38,906 Deficit accumulated during the development stage $(5,958,947) $(5,997,853) $(38,906) Consolidated Balance Sheet as of December 31, 2005 As Reported As Adjusted Effect of Change Current liabilities $ 88,806 $ 110,134 $ 21,328 Deficit accumulated during the development stage $(5,718,868) $(5,740,196) $(21,328) Consolidated Statement of Cash Flows for the six months ended June 30, 2006 As Reported As Adjusted Effect of Change Net loss $(240,079) $(257,657) $ 17,578 Increase (decrease) in Warrant liability $ - $ 17,578 $ 17,578 Consolidated Statement of Cash Flows for the year ended December 31, 2005 As Reported As Adjusted Effect of Change Net income $(380,764) $(337,751) $ (43,013) Increase (decrease) in Warrant liability $ - $ (43,013) $ (43,013) Consolidated Statement of Cash Flows for the six months ended June 30, 2005 As Reported As Adjusted Effect of Change Net loss $(148,611) $(109,864) $ 38,747 Increase (decrease) in Warrant liability $ - $ (38,747) $ (38,747) 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 34 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. No shares have been sold on this private offering, and no assurance can be given that we will be successful in raising these funds. 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 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. ---------------------- Three Months Ended June 30, 2006 compared to the Three Months Ended June 30, 2005. ----- Revenues for the quarters ending June 30, 2006, and 2005, were $500 and $0, 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 $189,049 for the quarter ended June 30, 2006, and $111,975 for the quarter ended June 30, 2005. Most of our expense related to the value of equity securities issued by us for services rendered. Our research and development expenses were $100,269 in the three months ended June 30, 2006, compared to $0 in the three months ended June 30, 2005. The decrease in 2005 was principally the result of our limited capital resources. Six Months Ended June 30, 2006 compared to the Six Months Ended June 30, 2005. ------------------------------------------------------------------------------ Revenues for the six months ending June 30, 2006, and 2005, were $5,563 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 $257,657 for the six months ended June 30, 2006, and $148,611 for the six months ended June 30, 2005. Most of our expense related to the value of equity securities issued by us for services rendered. Our research and development expenses were $135,178 in the six months ended June 30, 2006, compared to $0 in the six months ended June 30, 2005. The decrease in 2005 was principally the result of our limited capital resources. Liquidity. ---------- As of June 30, 2006, we had $53,322 in cash, with $197,686 in current liabilities. During the quarter ended June 30, 2006, we had net expenses of $190,072, while receiving $500 in revenues. We received $0 in revenues, and had total expenses of $114,742 during the quarter ended June 30, 2005. Most of these expenses related to the value of equity securities issued by us for services rendered. Cash resources at June 30, 2006, and December 31, 2005, were $53,322 and $159,466, respectively. A portion of our 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. No shares have been sold on this private offering, and no assurance can be given that we will be successful in raising these funds. 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 Secretary, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our President and Secretary concluded that information required to be disclosed is recorded, processed, summarized and reported within the specified periods and is accumulated and communicated to management, including our President and Secretary, to allow for timely decisions regarding required disclosure of material information required to be included in our periodic Securities and Exchange Commission reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our President and Secretary have concluded that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, 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 our internal controls 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. ---------------------------------------------------------------------- Name Date Shares ---- ---- ------ Thomas C. Drees 5/4/06 25,000 David E. Nelson 5/4/06 25,000 Edward L. Kunkel 5/4/06 25,000 Longevity Laboratories c/o L. Cass Terry 5/4/06 25,000 Craig Morrison 5/4/06 25,000 Herbert J. Meiselman 5/4/06 25,000 Robert Kwun 5/4/06 25,000 Jonathan Lakey 5/4/06 100,000 James Shapiro 5/4/06 50,000 Leonard W. Burningham 5/18/06 250,000 M. E. Dancy Consulting Services 7/6/06 400,000 These shares were issued to these individuals for services rendered, with the exception of the shares issued to Leonard W. Burningham, who exercised warrants. We issued these securities to persons who were "accredited investors" as defined in Rule 501 of the Securities and Exchange Commission; and each had prior access to all material information about us. We believe that the offer and sale of these securities was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Sections 4(2) and 4(6) thereof, and Rule 506 of Regulation D of the Securities and Exchange Commission; state sales to "accredited investors" are preempted by Section 18 of the Securities Act. 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: 10/17/2006 By:/s/Thomas C. Drees ----------- ------------------------------------- Thomas C. Drees, Ph.D., CEO, President and Chairman of the Board of Directors Date: 10/17/2006 By:/s/David E. Nelson ----------- ------------------------------------- David E. Nelson CFO and Director