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As filed with the Securities and Exchange Commission on December 6, 2000.
Registration No. 333-49044.
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2/A-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SANGUINE CORPORATION
--------------------
(Name of small business issuer in its charter)
Nevada 2835 95-4347608
------ ---- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
101 East Green Street, #11
Pasadena, California 91105
(626) 405-0079
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(Address and telephone number of principal executive offices)
101 East Green Street, #11
Pasadena, California 91105
--------------------------
(Address of principal place of business
or intended principal place of business)
Thomas C. Drees, Ph.D.
101 East Green Street, #11
Pasadena, California 91105
--------------------------
(Name, address and telephone number of agent for service)
Copies to:
Branden T. Burningham, Esq.
455 East 500 South, Suite 205
Salt Lake City, Utah 84111
(801) 363-7411
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount of Offering Aggregate Amount of
to be shares to be Price per Offering Registration
Registered Registered Share (1) Price (1) Fee
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Common Stock(2) 17,998,701 $0.4375 $7,655,681 $2,189.09
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(1) Estimated solely for the purpose of calculating the registration fee
under Rule 457(c) under the Securities Act on the basis of the average of the
bid and asked price of our common stock as quoted on the OTC Electronic
Bulletin Board on June 15, 2000.
(2) We are registering 17,998,701 shares of common stock that the selling
stockholders may sell as outlined herein.
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SANGUINE CORPORATION
17,998,701 Shares of Common Stock
This prospectus covers an aggregate of 17,998,701 shares of our common
stock that the selling stockholders may sell as outlined herein. It has been
filed with the Securities and Exchange Commission as part of a registration
statement that you may examine in the Securities and Exchange Commission's
EDGAR Archives.
Our common stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc.(the "NASD") under the symbol "SGNC."
On October 31, 2000, the date of the filing of the registration statement, the
average bid price of our common stock as quoted on the OTC Bulletin Board was
$0.4375.
These securities involve a high degree of risk. See the caption "Risk
Factors," beginning on page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved any of these securities or passed upon
the adequacy or accuracy of the prospectus. Any representation to the
contrary is a criminal offense.
The date of this prospectus is __________, 2000.
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TABLE OF CONTENTS
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Forward-Looking Information . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Determination of Offering Price and Dilution. . . . . . . . . . . . . . 9
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 11
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Directors, Executive Officers, Promoters and Control Persons . . . . . 13
Security Ownership of Certain Beneficial Owners and Management . . . . 17
Description of Securities . . . . . . . . . . . . . . . . . . . . . . .19
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . .21
Disclosure of Commission Position on Indemnification for Securities . .22
Act Liabilities
Description of Business . . . . . . . . . . . . . . . . . . . . . . . 23
Management's Discussion and Analysis or Plan of Operation . . . . . . .33
Description of Property . . . . . . . . . . . . . . . . . . . . . . . .36
Certain Relationships and Related Transactions . . . . . . . . . . . . 36
Market for Common Equity and Related Stockholder Matters . . . . . . . 36
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 38
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 41
Changes in and Disagreements with Accountants on Accounting and . . . .63
Financial Disclosure
Available Information . . . . . . . . . . . . . . . . . . . . . . . . .64
Dealer Prospectus Delivery Obligations . . . . . . . . . . . . . . . . 65
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PROSPECTUS SUMMARY
SANGUINE CORPORATION
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The Company
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You should carefully read our entire prospectus and consolidated
financial statements and related notes. Unless the context requires
otherwise, "we," "us," "our" and similar terms, as well as references to
"Sanguine," refer to Sanguine Corporation, a Nevada corporation, and its 94%
owned subsidiary, Sanguine Corporation, a California corporation.
We are engaged in the development of a synthetic red blood cell product
called "PHER-O2." Our product is in the research and development stage. No
government has approved its use or the testing of its efficacy. We have never
sold any PHER-O2. We have generated only limited revenues from the sale of
licenses or rights to market PHER-O2 if it ever proves to be useful and its
use is approved.
Our offices, consisting of approximately 970 square feet of office space,
are located at 101 East Green Street, #11, Pasadena, California 91105. Our
telephone number is (626) 405-0079.
The Offering
------------
Securities offered by us . . . .None.
Securities that may be sold
by our stockholders . . . . . . 17,998,701 shares of our common stock.
Use of proceeds . . . . . . . . We will not receive any money from the
selling stockholders when they sell shares of
our common stock; however, we may receive up
to $3,631,484 from the exercise of
outstanding warrants to acquire shares that
are being registered. As of the date of this
Prospectus, none of these warrants has been
exercised.
Offering Price . . . . . . . . .Market prices prevailing at the time of sale,
at prices related to the prevailing market
prices, at negotiated prices or at fixed
prices, all of which may change.
Transfer Agent . . . . . . . . .Colonial Stock Transfer, 455 East 400 South,
Suite #100, Salt Lake City, Utah
84111, serves as the transfer agent and
registrar for our outstanding securities.
We have agreed to pay all costs and expenses relating to the registration
of our common stock, with the exception that Westbury Consultancy Services
Limited ("Westbury") will pay $15,000 towards the legal fees for the
preparation and filing of the registration statement of which this prospectus
is a part. The selling stockholders will be responsible for any related
commissions, taxes, attorney's fees and other charges relating to the offer or
sale of these securities. The selling stockholders may sell their common
stock through one or more broker/dealers, and these broker/dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the selling stockholders as they shall agree.
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RISK FACTORS
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Our present and intended business operations are highly speculative and
involve substantial risks. Only investors who can bear the risk of losing
their entire investment should consider buying our shares. Among the risk
factors that you should consider are the following:
General Risks Related To Our Business.
--------------------------------------
If we do not meet our research and development goals or obtain regulatory
approvals, our business will fail.
----------------------------------
We have not received any revenues from the sale of our only product,
PHER-O2. Our ability to sell our product will depend upon our ability to
successfully develop, obtain regulatory approval for, manufacture and market
it. No one has performed any tests of any kind on PHER-O2. In addition, it
takes a long, uncertain amount of time to achieve regulatory approval and
market success. Our product will require significant additional research and
development, and extensive preclinical and clinical testing, before we will be
able to obtain United States Food and Drug Administration ("FDA") approval for
any use, if at all. We can not assure you that:
our research and development activities will be successful;
our product will prove to be safe or effective in any testing or
trials that are conducted;
we will obtain FDA approval;
we will be able to manufacture our product at a cost that will make
it commercially viable; or
if and when it receives any approval, we will be able to market it
successfully.
If we do not receive additional funding, we will not be able to develop
our product.
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We have limited operating capital. We estimate that we will need about
$20,000,000 to develop our product through the anticipated FDA and comparable
foreign agency approval. We will need to raise these funds through equity or
debt offerings, which will be very difficult for such a highly speculative
enterprise. $3,631,484 of these funds may be available to us if the warrants
are exercised, but any exercise of these warrants will depend upon the market
price for our common stock being substantially higher than the exercise prices
of the warrants. We can not assure you that we will be able to get the
required funding or that any funding will be on terms satisfactory to us.
This funding may also cause substantial dilution to our existing stockholders.
If we do not get the required funding, we believe that we will be unable to
develop our product for its intended uses, and our business will fail.
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We face substantial governmental regulation and product approval
requirements.
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We will face extensive regulation by several governmental authorities in
the United States and foreign countries. These regulations will affect our
research and development activities, as well as preclinical and clinical
trials, manufacturing and marketing of our product. All trials, manufacturing
and marketing of our product will have to undergo the rigorous testing and
approval processes of the FDA and corresponding foreign regulatory bodies.
Each clinical trial must be conducted under the auspices of an Independent
Review Board, which will consider, among other factors:
ethical considerations;
the safety of human subjects; and
the possible liability of the institution.
The regulatory process, which includes pre-clinical, clinical and post-
clinical testing of the product to establish its safety and efficacy, can take
many years and require the expenditure of large amounts of money. Data
obtained from these trials is always subject to varying interpretations, all
of which can extend the process, or result in limited or denied approval.
Regulations often change during the approval process, and these changes can
cause further delay and additional expense, and may prohibit approval. We may
encounter similar problems in foreign countries. We can not assure you that
we will get regulatory approval even after spending this time and money. If we
do obtain it, we can not guarantee that we will be able to commercially and
economically market the product. Even if we get approval, our product and
facilities will face continual review and periodic inspections. The
subsequent discovery of previously unknown problems with the product, the
manufacturer or its facilities may result in further restrictions on the
product or the manufacturer, and may include withdrawal of the product from
the market. If we fail to adhere to the stringent governmental regulations,
we may also receive fines, suspensions of regulatory approval, product
recalls, operating restrictions and criminal prosecution of our principals.
Because we do not have patent protection, we may lose business to
competitors with similar technologies.
--------------------------------------
We have no patents on our product, and have filed only one United States
patent application and one foreign patent application. We can not assure you
that we will be able to prove our product to be efficacious and to obtain any
required governmental approvals during the life of any patent or any
extensions of any patent that may be granted. Patents offer some protection
for products, but they are generally highly uncertain and involve complex
legal and factual questions. To date, no consistent policy has emerged as to
the breadth of claims allowed in biotechnology patents. We can not guarantee
that any patent will protect us against competitors with similar technologies
or who develop similar technologies.
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If we are unable to compete with larger competitors, our business will
fail.
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If it is proved efficacious for its intended uses and approved for use by
the FDA or any corresponding foreign agencies, PHER-O2 will compete directly
with established therapies for blood loss. Patients whose oxygen-carrying
ability has been significantly depleted by blood loss frequently receive
transfusions of red blood cells. Patients who have suffered more moderate
blood loss can be treated with various intravenous solutions, such as saline
or human serum albumin, which replace the volume of blood lost, but not its
oxygen carrying capacity. Even if the FDA or any corresponding governmental
agency approves this product for use, it may not have any significant
advantages over other products to cause the medical profession to adopt it
rather than continue to use established therapies. We will also be competing
with many other companies, research foundations and institutions seeking to
develop synthetic blood products. Almost all of these entities will have
substantially greater resources, personnel and facilities than we will have,
even if we succeed in raising the required capital to fund our proposed
business operations. We can not assure you that we will even be able to raise
the necessary funding.
If we lose Dr. Drees or Mr. Hargreaves, our operations will suffer.
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Thomas C. Drees, Ph.D., our President and Chief Executive
Officer, is the inventor of PHER-O2. He previously served as the President
and CEO of Alpha Therapeutics Corporation, a subsidiary of Green Cross
Corporation of Japan, that developed "Fluosol DA 20," the only synthetic blood
product that has received FDA approval to date. He has also written a widely-
acclaimed book on this subject, "Blood Plasma: The Promise and the Politics,"
Ashley Books, New York, 1983. Dr. Drees has been with us since inception, and
his retirement, disability or death would significantly impair the development
of our product and our intended business operations. Anthony G. Hargreaves,
who is the Vice Chairman of the Board of Directors, and our Vice President and
Secretary/Treasurer, has significant background in the medical field. This
includes service as General Manager of VK Limited of Pasadena, California,
where he was instrumental in securing funding for a wearable, continuously-
operating artificial kidney machine. Mr. Hargreaves has been with us since
our inception, and his retirement, disability or death could also hurt our
operations. We also believe that our newly-appointed members of management
are very important to our success.
Successful product liability claims would seriously impair our
operations.
-----------
The use of PHER-O2 in clinical trials and, if we receive regulatory
approval, the manufacture and marketing of this product, may expose us to
liability claims. These claims could seriously impair our business. Claims
may be made by users of the product or by entities that sell it. We
anticipate that PHER-O2 will be given in large doses. As a result, it must be
rigorously purified because impurities may lead to serious and potentially
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fatal toxic reactions. We intend to seek limited product liability insurance,
subject to available funding, before we begin any human clinical trials.
However, this insurance coverage is expensive, and we can not assure you that
we will be able to obtain it. If we can obtain it, we can not guarantee that
it will be at a reasonable cost or in sufficient amounts to protect us against
losses that may result from this liability. If we do not obtain insurance at
an acceptable cost, or otherwise protect against potential product liability,
we may not be able to commercialize our product. In addition, a product
liability claim or recall could result in our bankruptcy or otherwise hurt our
business.
You will not be able to elect our directors or officers.
--------------------------------------------------------
Our President and Chief Executive Officer, Thomas C. Drees, Ph.D., has
substantial voting control of our company. He can effectively elect all of
our directors, who in turn elect all of our executive officers, without regard
to the votes of other stockholders. If Westbury exercises all of its
outstanding warrants and retains voting control of the shares underlying these
warrants, Dr. Drees would not have absolute voting control, but he would still
be in a position to exert substantial influence on the election of all
directors who in turn elect all of the officers.
The auditor's "going concern" qualification in our financial statements
creates additional doubt about our ability to stay in business.
---------------------------------------------------------------
The Independent Auditors' Report issued on April 11, 2000, with respect
to our audited financial statements for the years ended December 31, 1999,
1998 and 1997, expresses substantial doubt about our ability to continue as a
going concern, due to our negative cash flows.
Risks Related To Our Common Stock.
----------------------------------
Due to the great instability in our common stock price, you may not be
able to sell your shares at a profit.
-------------------------------------
The public market for our common stock is limited and volatile. As with
the market for many other biotechnological companies, any market price for our
shares is likely to continue to be very volatile. In addition, factors such
as the following may significantly affect our stock price:
results of our clinical trials;
our competitors' announcements and successes;
other evidence about the safety or efficacy of our product;
announcements of new competitive products by our competitors;
increased governmental regulation of our product;
our competitors' developments of patents or proprietary rights; and
fluctuations in our operating results.
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In addition, the stock markets generally have experienced and continue to
experience extreme price and volume fluctuations. These fluctuations have
affected the market price of many biotechnological companies and have often
been unrelated to these companies' operating performance. These broad market
fluctuations, as well as general economic and political conditions, may reduce
the market price of our common stock.
The sale of already outstanding shares of our common stock could hurt our
common stock market price.
--------------------------
Approximately 10,391,835 shares of our common stock are publicly traded.
This number will be increased by the 3,871,940 presently outstanding shares
that may be offered by this prospectus, along with the 14,126,676 shares
underlying the warrants that also may be offered by this prospectus. In
addition, 1,250,000 shares of the 1,350,000 shares of common stock that we
issued and registered on May 9, 2000, for resale with the Securities and
Exchange Commission on Form S-8 may be publicly sold on or after May 7, 2001.
On that date, certain lock-up restrictions on these shares will expire.
Furthermore, most shares that are owned by members of management have been
held for a sufficient period of time that they may sell the allowed percentage
of these shares under Rule 144 of the Securities and Exchange Commission.
These shares of our common stock will substantially increase the number of
shares that may be available for public trading. The sale of these shares in
the public market may reduce the price of our common stock.
Our common stock is deemed to be "penny stock."
-----------------------------------------------
Our common stock is presently deemed to be "penny stock" that can only be
purchased by certain qualified persons, and broker/dealers are required to
determine that the purchase of securities that are "penny stocks" are suitable
investments for customers before completing the purchase of any of these
securities. This designation may limit the public market for our common
stock.
FORWARD-LOOKING INFORMATION
---------------------------
This is a summary of the terms of the common stock described in and
offered by this prospectus. It does not contain all of the information that
may be important to you. This prospectus contains "forward-looking"
information within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements contained in this prospectus involve
known and unknown risks, uncertainties and other factors that could cause
actual results, financial or operating performance to differ from the future
results, financial or operating performance or achievements expressed or
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implied by these forward-looking statements. You should carefully read the
this prospectus and the risks factors outlined above, along with the more
detailed information, financial statements and the notes to the financial
statements appearing elsewhere in this prospectus before you decide whether to
purchase the common stock described in this prospectus.
USE OF PROCEEDS
---------------
We will not receive any part of the proceeds from sale of our common
stock. However, we will receive $3,631,484, if all of the warrants are
exercised. As of the date of this Prospectus, none of these warrants has been
exercised.
DETERMINATION OF OFFERING PRICE AND DILUTION
--------------------------------------------
We will not receive any money from the selling stockholders when they
sell their shares of common stock, though we will receive funds from any
exercise of the warrants. The selling stockholders may sell all or any part
of their shares in private transactions or in the over-the-counter market at
prices related to the prevailing prices of our common stock at the time of
negotiation. Because we cannot accurately predict the prices of these sales,
we cannot accurately estimate the amount of any dilution that may result from
the purchase price of any of these shares. "Dilution" is the difference
between the price paid for the shares and our "net tangible book value." The
net tangible book value (deficit) of our common stock on September 30, 2000,
was ($432,115) or ($0.015) per share. Net tangible book value per share is
determined by subtracting our total liabilities from our total tangible assets
and dividing the remainder by the number of shares of common stock
outstanding. Taking into account the exercise of all warrants as of September
30, 2000, our net tangible book value at that date would be $3,199,369,
divided by 42,007,864 outstanding shares, resulting in a per share net
tangible book value of $0.076. As of the date of this Prospectus, none of
these warrants has yet been exercised. These computations do not include
230,000 shares that are to be issued to members of the Medical Advisory and
Applications Board and two other consultants as compensation for services
rendered through December 31, 2000, nor the estimated expenses of this
offering, estimated at approximately $52,000. The offer and sale by the
selling stockholders of the common stock that is outstanding, or those shares
underlying the warrants, will not have any effect on the net tangible book
value of our common stock, after taking into account the exercise of the
warrants.
We can not assure you that any public market for our common stock will
equal or exceed the sales price of our shares of common stock sold by our
stockholders. Purchasers of our shares face the risk that their shares will
not be worth what they paid for them.
SELLING SECURITY HOLDERS
------------------------
The following table provides information about the selling stockholders
and the common stock that each may sell, or retain after this offering, if
any:
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Common Stock (1)
----------------
Number of Shares
Beneficially Owned
Prior to Number of Shares
and Registered Beneficially Owned
Names of Selling Stockholders (2) in the Offering after the Offering
----------------------------- --------------- ------------------
Technogest S. A. 1,533,000 (3) -0- (3)
Wegelin & Co. 1,499,910 (3) -0- (3)
Sun Investment Partnership II 375,000 (3) -0- (3)
Geronimo Partners, LP 1,500,000 (3) -0- (3)
Laidlaw Global Securities, Inc. 490,791 (4) -0- (4)
Westbury Consultancy Services Limited 12,000,000 (5) -0- (5)
Michael Dancy 600,000 (6) -0- (6)
----------
17,998,701
(1) We assume no purchase in this offering by the selling stockholders of
any shares of our common stock.
(2) No director, advisory director, executive officer or any "associate"
of any director, advisory director or executive officer has any interest,
direct or indirect, by security holdings or otherwise, in any of the
selling stockholders.
(3) Includes these shares underlying warrants: Technogest S. A., 511,000;
Wegelin & Co., 499,970; Sun Investment Partnership II, 125,000; and Geronimo
Partners, LP, 500,000. Assumes that all warrants are exercised and all common
stock owned and/or received on the exercise of the warrants are sold.
(4) Includes 490,791 shares underlying warrants, and assumes that all
warrants are exercised and all common stock owned and/or received on the
exercise of the warrants are sold.
(5) Includes 12,000,000 shares underlying warrants, and assumes that all
warrants are exercised and all common stock received on the exercise of the
Warrants are sold.
(6) Assumes that all 600,000 shares that are owned will be sold.
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PLAN OF DISTRIBUTION
--------------------
We are registering the shares of our common stock covered by this
prospectus.
We will pay the costs, expenses and fees of registering our common stock,
with the exception that Westbury will pay $15,000 towards the legal fees for
the preparation and filing of the registration statement of which this
prospectus is a part. All of the selling stockholders will be responsible
for any related commissions, taxes, attorney's fees and other charges that
each may incur in connection with the offer or sale of these securities.
The selling stockholders may sell our common stock at market prices
prevailing at the time of the sale, at prices related to the prevailing market
prices, at negotiated prices or at fixed prices, any of which may change.
They may sell some or all of their common stock through:
ordinary broker's transactions, which may include long or short
sales;
purchases by brokers, dealers or underwriters as principal and
resale by those purchasers for their own accounts under this
prospectus;
market makers or into an existing market for our common stock;
transactions in options, swaps or other derivatives; or
any combination of the selling options described in this
prospectus, or by any other legally available means.
In addition, the selling stockholders may enter into hedging transactions
with broker/dealers, who may engage in short sales of our common stock in the
course of hedging the positions they assume. Finally, they may enter into
options or other transactions with broker/dealers that require the delivery of
our common stock to those broker/dealers. Subsequently, the shares may be
resold under this prospectus.
In their selling activities, the selling stockholders will have to comply
with applicable provisions of the Securities Exchange Act of 1934 (the
"Exchange Act"), and its rules and regulations, including Regulation M. These
may limit the timing of purchases and sales of our common stock by the selling
stockholders.
The selling stockholders and any broker/dealers involved in the sale or
resale of our common stock may qualify as "underwriters" within the meaning of
Section 2(11) of the Securities Act. In addition, the broker/dealers'
commissions, discounts or concessions may qualify as underwriters'
compensation under the Exchange Act. If any broker/dealer or selling
stockholder qualifies as an "underwriter," he/it will have to deliver our
prospectus as required by Rule 154 of the Securities and Exchange Commission.
In addition, any broker/dealer that participates in a distribution of these
shares will not be able to bid for, purchase or attempt to induce any person
to bid for or purchase any of these shares as long as the broker/dealer is
participating in the distribution. The ability of participating
broker/dealers to stabilize the price of our shares will also be restricted.
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If the selling stockholders sell our shares to or through brokers,
dealers or agents, they may agree to indemnify these brokers, dealers or
agents against liabilities arising under the Securities Act or the Exchange
Act. We do not know of any existing arrangements between the selling
stockholders and any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of our common stock.
In addition to selling their common stock under this prospectus, the
selling stockholders may:
transfer their common stock in other ways not involving market
makers or established trading markets, including by gift,
distribution or other transfer; or
sell their common stock under Rule 144 of the Securities and
Exchange Commission, if the transaction meets the requirements of
Rule 144.
We have advised the selling stockholders that during the time they are
engaged in the distribution of our common stock that they own, they must
comply with Rule 10b-5 and Regulation M promulgated by the Securities and
Exchange Commission under the Exchange Act. They must do all of the following
under this Rule and Regulation:
not engage in any stabilization activity in connection with our
common stock;
furnish each broker who may be offering our common stock on their
behalf the number of copies of this prospectus required by each
broker;
not bid for or purchase any of our common stock or attempt to
induce any person to purchase any of our common stock, other than
as permitted under the Exchange Act;
not use any device to defraud;
not make any untrue statement of material fact or fail to state
any material fact; and
not engage in any act that would operate as a fraud or deceit upon
any person in connection with the purchase or sale of our shares.
To the extent that any selling stockholder may be an "affiliated
purchaser" as defined in Regulation M, he/it has been further advised that
he/it must coordinate his/its sales under this prospectus with us for the
purposes of Regulation M.
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To the extent required by the Securities Act, a supplemental prospectus
will be filed, disclosing:
the name of any broker/dealers;
the number of securities involved;
the price at which the securities are to be sold;
the commissions paid or discounts or concessions allowed to the
broker/dealers, where applicable;
that the broker/dealers did not conduct any investigation to
verify the information set out in this prospectus, as supplemented;
and
other facts material to the transaction.
There is no assurance that any selling stockholder will sell any of our
common stock.
LEGAL PROCEEDINGS
-----------------
We are not a party to any pending material 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.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Directors and Executive Officers.
---------------------------------
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
---- ---- ----------- --------------
<S> <C> <C> <C>
Thomas C. Drees, CEO 6/93 *
Ph.D. 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 *
Merton Dick Van Orden Director 10/00 *
David E. Nelson, CPA Director 3/96 *
Chief Financial 3/96 *
Officer
Edward L. Kunkel, Esq. Director 4/94 *
* These persons presently serve in the capacities
indicated.
</TABLE>
13
<PAGE>
<TABLE>
Medical Advisory and Applications Board of Directors.
-----------------------------------------------------
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
---- ---- ----------- --------------
<S> <C> <C> <C>
Rear Admiral (Retired) Chairman 10/00 *
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.
Thomas C. Drees, Ph.D., MBA, CEO, President and a Director. Dr. Drees,
age 71, 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 26 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 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 72 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.
14
<PAGE>
Admiral Merton Dick Van Orden, Chairman of the Medical Advisory Board,
Chief Operating Officer and Director, is 79 years age, and a graduate of the
United States Naval Academy, Class of 1945 (graduated in wartime 1944). He
also holds degrees from M. I. T. (BSEE); George Washington University (MBA);
and he is a graduate of the Advanced Management Program of the Harvard
Graduate School of Business. He completed 31 years active duty in the United
States Navy with WWII combat service aboard an Aircraft Carrier in the
Pacific, followed by a Minesweeper in the Atlantic, and an Amphibious
Transport in the Atlantic and Mediterranean. He then became an Engineering
Duty Officer(Electronics) leading to positions primarily in Research and
Development activities. He was commanding officer of the Navy Electronics
Laboratory Center, and later was appointed the Chief of Naval Research.
Following retirement from active Navy service, Admiral Van Orden has been
employed as a management and scientific consultant, and has served on Boards
of Directors of a number of small, technically-oriented companies. He served
as the pro bono Research Director for the Paralysis Cure Foundation, later the
American Paralysis Association, and as President of the Surgical Research
Foundation. He has a number of publications in his name, and is the author of
four books for young Americans on the subject of Navy and Coast Guard ships.
He is also a member of the Board of Directors of Blue Sea Corporation, which
is engaged in developing designs of innovative ship types and producing SWATH
ships for the offshore oil industry.
David E. Nelson, CPA, Chief Financial Officer and Director. Mr. Nelson,
age 57, 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 53 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 58 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.
15
<PAGE>
William Regelson, M.D., Advisory Board Member, is 75 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-
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 59 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 60 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.
16
<PAGE>
Significant Employees.
----------------------
We do not currently have any employees who are not executive officers,
but who are expected to make a significant contribution to our business.
Family Relationships.
---------------------
There are no family relationships between any of our directors or
executive officers.
Involvement in Certain Legal Proceedings.
-----------------------------------------
During the past five years, none of our present or former directors,
executive officers or persons nominated to become directors or executive
officers:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding, excluding traffic violations and other minor
offenses;
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction in a civil
action, the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
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 prospectus:
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
</TABLE>
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address Beneficially Owned of Class (1)
---------------- ------------------ --------
<S> <C> <C>
Thomas C. Drees, Ph.D., MBA 10,389,133 24.4%
101 East Green Street, #11
Pasadena, California 91105
Anthony G. Hargreaves 1,770,642 4.2%
101 East Green Street, #11
Pasadena, California 91105
Merton Dick Van Orden -0- -0-
5953 Woodscrew Court
McLean, Virginia 22101-2532
David E. Nelson, CPA 100,150 .2%
528 14th Avenue
Salt Lake City, Utah 84103
Edward L. Kunkel, Esq. 60,000 .1%
16 N. Marengo Ave, #517
Pasadena, California 91103
__________ ______
All directors and officers as a group
(five persons) 12,319,925 28.9%
</TABLE>
17
<PAGE>
FIVE PERCENT STOCKHOLDERS
-------------------------
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address Beneficially Owned of Class
---------------- ------------------ --------
<S> <C> <C>
Thomas C. Drees, Ph.D., MBA 10,389,133 24.3%
101 East Green Street, #11
Pasadena, California 91105
Westbury Consultancy Services 12,000,000 28.1%
Limited
Calle Villa Doaat 172
Cuarto 3, Barcelona, Spain
Karl Smith (2) 1,600,000 3.7%
455 East 500 South, #201
Salt Lake City, Utah 84111
----------- -----
23,989,133 56.4%
</TABLE>
(1) Based upon 42,718,506 shares of outstanding common stock, and assumes
that the following shares of common stock underlying options or the 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; 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; 14,126,676 shares underlying the warrants
owned by the selling stockholders; and 230,000 shares that are to be issued to
the members of the Medical Advisory and Applications Board for services
rendered through December 31, 2000.
(2) These shares include 400,000 shares standing in the name of Smith
Consulting Services, Inc. and 600,000 shares standing in the name of A. Smith
and Associates, Inc., both of which are controlled by Mr. Smith.
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. However,
because of the number of warrants that are owned by Westbury, the exercise of
these warrants and the continued ownership of the underlying shares by
Westbury could substantially influence the control of our company. Westbury
has indicated in its Schedule 13D filing with the Securities and Exchange
Commission that it acquired these warrants for investment, and not as a means
of influencing the control of our company.
18
<PAGE>
DESCRIPTION OF SECURITIES
-------------------------
Common Stock.
-------------
Our authorized capital stock consists of 100,000,000 shares of common
stock, $0.001 par value per share.
Our Articles of Incorporation authorize the Board of Directors to declare
and pay dividends on our common stock out of funds legally available for the
payment of dividends. The holders of our common stock are entitled at all
stockholder meetings to one vote for each share of common stock held. Fully-
paid common stock shall not be liable to any further call or assessment. Our
common stock has no pre-emptive rights, and stockholders are not allowed to
cumulate their votes by multiplying the number of shares owned by the number
of directors being elected and casting all votes for one director.
Our Articles of Incorporation and Bylaws do not contain any provision
that would delay, defer or prevent a change in the control of our company.
Warrants.
---------
On September 1, 2000, and effective as of August 29, 2000, we completed
the offer and sale through Laidlaw Global Securities of 1,635,970 units at a
price of $0.50 per unit (the "Laidlaw Private Offering"). We received
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 equal to $.40 per share, subject to adjustment in certain
circumstances. The warrants are exercisable at any time beginning on the date
of issuance and ending four years later, subject to an effective registration
statement covering the exercise having been filed with the Securities and
Exchange Commission. Beginning one year after their issuance, the warrants
are redeemable, in whole or in part, at our option, for $0.05 per warrant on
not less than 30 days' prior written notice, at any time, provided that:
the closing bid price of our common stock is at least 200% of the
then current warrant exercise price and the public trading volume of
our common stock is not less than 50,000 shares per day on each of
the 20 consecutive trading days ending within 10 days from the date
of the notice of redemption; and
the shares underlying the warrants have been registered for public
distribution under the Securities Act.
We were required to file the registration statement, at our cost, within
30 days of the closing of the Laidlaw Private Offering or September 30, 2000
(October 2, 2000, because September 30, 2000 fell on a weekend), and to cause
this registration statement to be declared effective within 150 days of
closing. The warrant exercise price was to be reduced by $0.05 for each 30
day delay in the filing or effectiveness of the registration statement.
Because we did not file this registration statement within 30 days of the
closing, the warrant exercise price has now been reduced to $0.35 per share.
19
<PAGE>
On June 8, 2000, we executed and delivered a Warrant Agreement under
which we granted to Westbury warrants to acquire 12,000,000 shares of our
common stock at an exercise price of $0.30 per share. The exercise price was
determined under the Warrant Agreement based upon 120% of our next private or
public offering, which was the Laidlaw Private Offering. The minimum exercise
price was $0.25 per share.
The Warrant Agreement provided, among other things, for:
the issuance of 120,000 warrants, with each of the warrants being
convertible into 100 shares of our common stock;
the warrants to expire at 5:00 p.m. on March 20, 2005;
protection against dilution in certain events, including the sale of
common stock at less than market value, or in the event of any
merger where we are not the survivor, or any reclassification or
capital reorganization in which the adjustment would result in a
decrease of the exercise price of more than $0.10 per share, and
excluding certain types of transactions from any right of
adjustment; and
the granting of "registration rights" covering the underlying
shares, with Westbury to pay the sum of $15,000 towards any such
registration with the Securities and Exchange Commission.
Under the Warrant Agreement, no warrant could be exercised until the
expiration of 90 days from the date of the Warrant Agreement.
On November 10, 2000, our Board of Directors adopted the Warrant
Agreement and negotiated a reduction in the term of the warrants from March
20, 2005, to one year from the effective date of this registration statement.
In consideration of Westbury's assent to this reduction in the warrant term,
the exercise price of the warrants was reduced from $0.30 per share to $0.25
per share.
Penny Stock.
------------
Our common stock is "penny stock" as defined in Rule 3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks:
with a price of less than five dollars per share;
that are not traded on a "recognized" national exchange;
whose prices are not quoted on the NASDAQ automated quotation
system; or
in issuers with net tangible assets less than $2,000,000, if the
issuer has been in continuous operation for at least three
years, or $5,000,000, if in continuous operation for less than
three years, or with average revenues of less than $6,000,000 for
the last three years.
20
<PAGE>
Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and
Exchange Commission require broker/dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny stocks and
to obtain a manually signed and dated written receipt of the document before
making any transaction in a penny stock for the investor's account. You are
urged to obtain and read this disclosure carefully before purchasing any of
our shares.
Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in these stocks before selling any penny stock to that investor.
This procedure requires the broker/dealer to:
get information about the investor's financial situation,
investment experience and investment goals;
reasonably determine, based on that information, that transactions
in penny stocks are suitable for the investor and that the
investor can evaluate the risks of penny stock transactions;
provide the investor with a written statement setting forth the
basis on which the broker/dealer made his or her determination;
and
receive a signed and dated copy of the statement from the
investor, confirming that it accurately reflects the investor's
financial situation, investment experience
and investment goals.
Compliance with these requirements may make it harder for our selling
stockholders and other stockholders to resell their shares.
INTEREST OF NAMED EXPERTS AND COUNSEL
-------------------------------------
We have included our financial statements as of December 31, 1999, 1998
and 1997 in reliance on the report of Schvaneveldt and Company of Salt Lake
City, Utah, independent certified public accountants. Schvaneveldt and
Company was a sole proprietorship operated by Darrell T. Schvaneveldt, CPA,
who died on September 8, 2000. Neither Schvaneveldt and Company nor Mr.
Schvaneveldt had any interest, direct or indirect, in our company.
Leonard W. Burningham, Esq. and Branden T. Burningham, Esq., lawyers, of
Salt Lake City, Utah, father and son, associates in the practice of law and
co-counsel for our company are each stockholders of our company, respectively
owning 182,000 and 50,000 of our shares of common stock. Messrs. Burningham
and Burningham prepared the registration statement and this prospectus and
will provide any legal opinions required with respect to any related matter.
All of their shares are subject to lock-up and may not be sold until on or
after May 7, 2001.
We have not hired any expert or counsel on a contingent basis. Except as
21
<PAGE>
indicated above, no expert or counsel will receive a direct or indirect
interest in our company, and no such person was a promoter, underwriter,
voting trustee, director, officer or employee of our company.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
-----------
Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes a
Nevada corporation to indemnify any director, officer, employee or corporate
agent "who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation" due to his or her corporate role. Section 78.751(1)
extends this protection "against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit or proceeding if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the
right of the corporation. The party must have been acting in good faith and
with the reasonable belief that his or her actions were not opposed to the
corporation's best interests. Unless a court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee or agent is
successful on the merits or otherwise in defending any action or proceeding
referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS
requires that he or she be indemnified "against expenses, including attorneys'
fees, actually and reasonably incurred by him or her in connection with the
defense."
Section 78.751(4) of the NRS limits indemnification under Sections
78.751(1) and 78.751(2) to situations in which either (1) the stockholders,
(2)the majority of a disinterested quorum of directors, or (3) independent
legal counsel determine that indemnification is proper under the
circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may advance an
officer's or director's expenses incurred in defending any action or
proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides that
the rights to indemnification and advancement of expenses shall not be deemed
exclusive of any other rights under any bylaw, agreement, stockholder vote or
vote of disinterested directors. Section 78.751(6)(b) extends the rights to
indemnification and advancement of expenses to former directors, officers,
employees and agents, as well as their heirs, executors and administrators.
22
<PAGE>
Regardless of whether a director, officer, employee or agent has the
right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his or her behalf against liability resulting from his
or her corporate role.
Article V of our Bylaws requires us to indemnify our directors and
executive officers, former directors and executive officers and directors and
executive officers of subsidiaries against expenses necessarily incurred by
them in defending any action in which they are made parties due to their
service as directors or executive officers, except in relation to matters as
to which such directors or executive officers are adjudged to be liable for
negligence or misconduct.
Insofar as indemnification for liabilities arising under the Securities
Act or the Exchange Act may be permitted to our directors, executive officers
and controlling persons the foregoing provisions or otherwise, we have been
advised that it is the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act or
the Exchange Act, and is therefore unenforceable. If a claim for
indemnification against these liabilities, other than our payment of expenses
incurred or paid by any of our directors, executive officers or controlling
persons in the successful defense of any action, suit or proceeding is
asserted by the director, executive officer or controlling person in
connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question whether
indemnification by us is against public policy as expressed in the Securities
Act or the Exchange Act and will be governed by the final adjudication of that
issue.
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."
23
<PAGE>
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 California
in exchange for shares of our common stock.
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 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.
On June 8, 2000, we executed and delivered a Warrant Agreement under
which we granted Westbury warrants to acquire 12,000,000 shares of our common
stock at an exercise price of $0.30 per share, exercisable until March 20,
2005, in exchange for consulting services .
On November 10, 2000, our Board of Directors adopted the Warrant
Agreement and negotiated a reduction in the term of the warrants from March
20, 2005, to one year from the effective date of this registration statement.
In consideration of Westbury's assent to this reduction in the warrant term,
the exercise price of the warrants was reduced from $0.30 per share to $0.25
per share. A significant expense of approximately $4,500,000 related to the
grant of these warrants will be recorded in the fourth quarter which is when
the grant was approved by the Board of Directors.
The purchasers of units under the Laidlaw Private Offering had no prior
notice of the granting of the Westbury warrants, and may have had a right of
rescission of their purchase of the units. We have subsequently advised these
purchasers of all material information about the Westbury warrants; offered
these purchasers a right of rescission; received signed agreements from these
purchasers acknowledging that (i) each has been privately offered the right to
rescind the purchase of the units, (ii) to receive the consideration paid,
together with applicable interest as provided by law and (iii) that none
wishes to accept the rescission offer.
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
900 times smaller than a red blood cell. We believe that PHER-O2 can carry
24
<PAGE>
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 anticipate that upon completion of the compounding of PHER-O2,
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 first
phase of development will involve:
compounding PHER-O2;
seeking regulatory approval for gross animal testing and conducting
this testing; and
the manufacturing of available product for this testing.
In our second 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 cancer treatment and angioplasty; and
complete overseas testing, begin overseas sales and begin the
construction of manufacturing facilities.
We have licensed BioLogix Development Partners to manufacture and market
PHER-O2 in Canada, including any future Canadian patent rights, and the
exclusive right to market PHER-O2 in United States military pre-hospital
markets. 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 is still in the research and development stage. It 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
25
<PAGE>
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 only one product, PHER-O2, which is still in the research and
development stage. Our success hinges solely 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 1/900th the size of a red blood cell.
PHER-O2 is a second generation drug from Fluosol-DA, the only
synthetic red blood cell approved by the FDA. This process was completed
under the management of our President and CEO, Thomas C. Drees, Ph.D.
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;
26
<PAGE>
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 blood. 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.
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.
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 900 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 has obtained FDA approval 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 would otherwise be. This competitor
has announced that it will 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 to mechanically
pump and oxygenate heart patients' blood. This procedure is known as
"cardioplegia." Surgeons currently use saline, dextrose or hydroxyethyl
27
<PAGE>
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.
Distribution Methods of Our Product.
------------------------------------
We will not determine distribution methods of our product unless and
until we are near receiving any required regulatory approval of our product.
We can not guarantee that we will ever receive any regulatory approval.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
----------------
We filed United States Application Patent No. 07/952/403, covering PHER-
O2, with the United States Patent Office on September 28, 1992. No patent has
been issued, and we will 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 will 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, perflourodecalin, to maintain the small
particle size in the emulsion of PHER-O2 because the particle size of decalin
in the blood stream can quickly increase in size and block arteries and veins.
These surfactants are:
Fluorsurfactants based on Phosphatidyl Choline or Glycerophos-
phorylcholine, Accession No. 94012;
Stable Amide bond-Lined Perfluoro Phosphatidyl Choline Surfactants,
Accession No. 94013;
New Polyvinylpyrrolidone Oligomer-Based Fluorosurfactants, Accession
28
<PAGE>
No. 94014;
Self-Aggregating Extended Lifetime Hydrophilic Fluorocarbon
Ampiphiles for Blood Oxygen or Drug Delivery;
Perfluorosurfactants with Enhanced Prevention of Volaile
Fluorocarbon Diffusion for Preparation of Fluorocarbon Emulsions
with Improved Stability;
Highly Branched (e.g. Dendritic) Hydrophilic Oligomers/Polymers with
Covalently Attached Fluorocarbon-philic or Lipophilic Components for
Preparation of Human Blood Circulatory System Extended Lifetime
Perfluorocarbon Emulsions, or Very Small Particle Lipid Dispersions,
for Prolonged (greater than one week) Oxygen or Drug Delivery; and
Method to Prepare Branched Water and Blood Soluble Oligomers with
Mono-primary End Groups and their Use to Prepare New Perfluoro or
Fatty Group-Based Surfactants.
There is a dispute over the ownership of the last four 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.
Status of any Publicly Announced New Product or Service.
--------------------------------------------------------
We have no new products or any additional proprietary rights, but we
anticipate that we may acquire additional proprietary rights during our future
research and development activities.
Competitive Business Conditions.
--------------------------------
Several other companies, both domestic and foreign, are working to
develop alternatives to human blood. They include:
Alliance Pharmaceutical Corporation of San Diego, California;
Biopure Corporation of Cambridge, Massachusetts ; and
Northfield Laboratories, Inc. of Evanston, Illinois.
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 human blood and recombinant hemoglobin. Neither the list
of competitors nor the list of human blood substitutes is exhaustive.
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
29
<PAGE>
to compete successfully.
Sources and Availability of Raw Materials.
------------------------------------------
We plan to purchase medical-grade perfluorocarbons and surfactants from
reliable vendors and to emulsify these ingredients in our own facilities,
depending upon funding. Air Products and Chemicals, Inc., Fluori-Seal, Inc.,
PCR, Inc. and FZ Chemicals, Ltd. 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, McGaw and Fresenius Kabi 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.
We do not have any Present Customers or Material Contracts for Research and
Development of our Product.
---------------------------
We do not presently have any customers. We believe that there are a
number of firms that are able to conduct the necessary research and
development for our product, but we have not concluded any active negotiations
with any firm for these services.
Our Product Will Require Governmental Approval.
-----------------------------------------------
The FDA and comparable foreign agencies require laboratory testing,
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" commencing on page 33.
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 only product, PHER-O2, will require regulatory approval by
appropriate governmental agencies before it can be commercialized. Human
30
<PAGE>
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.
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 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.
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
31
<PAGE>
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.
----------------------------------
In calendar years ended 1998 and 1999, we expended a total of
approximately $276,000 on research and development, $78,000 in 1999 and
$198,000 in 1998. None of these costs were borne by customers or others.
Number of Employees.
--------------------
We presently have three employees, our President, Thomas C. Drees, Ph.D.;
our Chief Financial Officer, David E. Nelson; and our Vice President and
Secretary/Treasurer, Anthony G. Hargreaves. Dr. Drees and Mr. Hargreaves are
employed full time. If we are able to complete the development of PHER-O2 and
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.
Reports to Security Holders.
----------------------------
The NASD requires that all issuers maintaining quotations of their
securities on the OTC Bulletin Board file periodic reports under the Exchange
Act, and we do file periodic reports with the Securities and Exchange
Commission under Section 13 of the Exchange Act.
The public may read and copy any materials that we file with the
Securities and Exchange Commission at its Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
32
<PAGE>
operation of the Public Reference Room by calling the Securities and Exchange
Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains an Internet site, the "EDGAR Archives," that contains reports, proxy
and information statements and other information about issuers that file
electronically with the Securities and Exchange Commission. The address of
that site is www.sec.gov.
We intend to furnish to our stockholders annual reports containing
financial statements audited and reported upon by our independent accounting
firm and other periodic reports as we may determine to be appropriate or as
may be required by law.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Plan of Operation.
------------------
We have not commenced planned principal operations, and have made little
progress since the end of fiscal 1998.
Our proposed plan of operation is composed of three "phases," each of
which coincides with a specific milestone in the process of developing PHER-
O2. Each of these phases will begin subject to available funding. Each
phase, and the projected cost of each, is as follows:
Phase I (approximately one year): In the first six months, we
plan to complete the development of perfluoro-decalin and
the synthetic surfactants that make up PHER-O2, manufacture
experimental doses and perform preliminary animal tests in
accordance with FDA and overseas regulations. In the second six
months, we intend to continue developing the
perfluorocarbon compounds in PHER-O2 in order to produce optimal
qualities and to conduct animal safety and efficacy trials in
accordance with FDA and overseas requirements. During the course of
Phase I, we estimate that our increased technical,
administrative, sales/marketing and manufacturing requirements will
require us to the hire a few additional employees. Estimated
cost is $1,500,000, divided as follows: Completing the surfactant
formulation and the manufacture of sufficient product for initial
testing, $500,000; animal safety and efficacy trials through a sub-
contractor, $600,000; and administrative, patent and proprietary
right protection and marketing costs, $400,000.
Phase II (approximately one year): In the second year, we intend
to prepare New Drug Applications for FDA and European approval,
conduct trials for cardioplegia, cancer treatment and cardiology
treatment in the United States and conduct transfusion trials
offshore. During this period, we also plan to submit license
applications for transfusion with overseas authorities, begin
production of PHER-O2 itself or with our subcontractors and submit
a New Drug Application for PHER-O2 in the United States.
During the course of Phase II, we estimate that we will need to hire
a few additional employees. Estimated cost is $3,500,000, divided as
33
<PAGE>
follows: Prepare and file United States and European New Drug
Applications, $300,000; conduct human safety and efficacy trials
through a subcontractor in the United States and overseas,
$2,000,000; set-up pilot facility, or subcontract, to manufacture
small quantities of PHER-O2 for use in testing and in connection
with the New Drug Applications, $500,000; submit license
applications for use of PHER-O2 in transfusions overseas, $200,000;
and administrative, patent and proprietary right protection and
marketing costs, $500,000.
Phase III (approximately one year): In the third year, we plan to
complete overseas testing of PHER-O2, begin sales in Europe and
other overseas areas that may have approved PHER-O2 by this time
and may begin construction of facility for manufacturing, storing,
inspecting and shipping PHER-O2. During the course of Phase III, we
estimate that we will need to hire additional employees. During the
third year, we plan to complete testing of PHER-O2 in the United
States and receive all necessary FDA approvals and begin American
and Canadian sales for cancer treatment and angioplasty. During
this period, we also plan to complete construction of our
manufacturing facility, unless we determine to subcontract this
process, and continue trials of other PHER-O2 applications,
including transplant organ preservation and treatment of carbon
monoxide poisoning, sickle cell anemia, stroke and heart attack.
The estimated cost for Phase III is $15,000,000, divided as follows:
Complete human safety and efficacy clinical trials and obtain
United States and overseas agency approval of PHER-O2, $9,000,000;
construct manufacturing facility or subcontract with major
emulsifying firm, $3,000,000; recruit and train sales force of the
United States and foreign markets, $1,500,000; and administrative,
patent and proprietary right protection and marketing costs,
$1,500,000.
These cost estimates are based upon the prior experience of
Thomas C. Drees, Ph.D., our President and CEO. Dr. Drees has more than
25 years' experience in the blood industry.
Our plan of operation for the next 12 months is to:
begin Phase I and to complete the synthesis of the PHER-O2
surfactant and its emulsion with perfluoro-decalin;
manufacture experimental doses of PHER-O2; and
perform preliminary animal tests in accordance with FDA and
comparable foreign overseas regulations.
Our ability to begin and to carry out our plan depends entirely upon our
ability to obtain substantial equity or debt financing. We can not assure you
that we will receive this financing. If we do not receive it, we will not be
able to proceed with our business plans.
Results of Operations.
----------------------
34
<PAGE>
During the quarterly period ending September 30, 2000, our only business
operations were those of Sanguine California. During this period, we received
total revenues of $7,625 from the sale of rights to represent us and receive a
1% royalty on sales in Greece for three years and sustained a net loss of
($144,838).
Revenues for the calendar years ending December 31, 1999 and 1998
were $0 and $0, respectively. We had no material operations, except the
limited research and development activities related to our subcontracted
research and development of our product.
We realized a net loss from operations of ($217,864), with a loss of
($0.01) per share during the calendar year ended December 31, 1999, and a net
loss from operations of $(366,439), with a loss of $(0.02) per share for the
year ending December 31, 1998.
Our research and development expenses were $78,000 in 1999, compared to
$198,000 in 1998; the difference between these expenditures is the primary
difference in expenses between 1999 and 1998.
Liquidity.
----------
During the quarterly period ended September 30, 2000, we had total
expenses of $152,463, while receiving $7,625 in revenues; compared
to the period ended September 30, 1999, we had total expenses of $65,497,
while receiving $0 in revenues.
As of September 30, 2000, we had $660,374 in cash, with $1,092,489 in
current liabilities.
We received $91,500 on August 3, 2000, for the sale of the rights to
represent us and to receive a 1% royalty on sales in Greece for a period of
three years; and an additional $691,506 net proceeds from the Laidlaw Private
Offering, was received on September 1, 2000.
During the period ended September 30, 2000, we retained Starpoint
Procurement Company as a marketing and joint venture corporate advisor in
exchange for $92,000. The payment of $92,000 was made by Dr. Drees and is
therefore reflected as a note payable at September 30, 2000.
During the calendar year ended December 31, 1999, we had expenses of
$217,864, while receiving $0 in revenues. We received no revenues, and had
total expenses of $366,439 during the calendar year ended December 31, 1998.
The amount of research and development in 1998 exceeded these expenses in 1999
by $120,000.
Cash resources at December 31, 1999 and 1998 were $1,062 and $499,
respectively. We issued approximately 52,777 shares of our common stock in
consideration of cash in the amount of $9,500; and 100,000 shares of our
common stock in consideration of services valued at $10,000.
35
<PAGE>
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
$1,695.75 per month. The lease runs through April 30, 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Transactions with Management and Others.
----------------------------------------
Except as outlined under the caption "Executive Compensation" commencing
on page 38. 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.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Market Information.
-------------------
Until the quarter ended June 30, 1994, and for at least five years
previously, there had been no "public market" for our shares of common stock.
Our common stock began to trade on the OTC Bulletin Board of the NASD in the
second quarter of 1994 under the symbol "SGNC."
The range of high and low bid quotations for our common stock during the
each quarter of the year ended December 31, 1998, each quarter of the calendar
year ended December 31, 1999, and the first three quarters of 2000, 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.
<TABLE>
<CAPTION>
STOCK QUOTATIONS
BID
Quarter ended: High Low
-------------- ---- ---
<S> <C> <C>
March 31, 1998 $0.5312 $0.125
June 30, 1998 $1.0937 $0.25
September 30, 1998 $0.75 $0.1562
36
<PAGE>
December 31, 1998 $0.3437 $0.1562
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
</TABLE>
Resales of Restricted Securities.
---------------------------------
Approximately 10,391,835 shares of our common stock are publicly traded.
This number will be increased by the 3,871,940 presently outstanding shares
that may be offered by this prospectus, along with the 14,126,676 shares
underlying the warrants that also may be offered by this prospectus. In
addition, 1,250,000 shares of the 1,350,000 shares of common stock that we
issued and registered on May 9, 2000, for resale with the Securities and
Exchange Commission on Form S-8 may be publicly sold on or after May 7, 2001.
On that date, certain lock-up restrictions on these shares will expire.
Furthermore, most shares that are owned by members of management have been
held for a sufficient period of time that they may sell the allowed percentage
of these shares under Rule 144 of the Securities and Exchange Commission.
These shares of our common stock will substantially increase the number of
shares that may be available for public trading. The sale of these shares in
the public market may reduce the price of our common stock.
Holders.
--------
As of the date of this prospectus, we have about 496 stockholders. This
figure does not include an indeterminate number of stockholders who may hold
their shares in "street name."
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.
37
<PAGE>
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:
<TABLE>
<CAPTION>
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
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C.
Drees, Ph.D,12/31/98 * 0 0 0 0 0 0
CEO, 12/31/99 * 0 0 0 0 0 0
President 9/30/00 0 0 0 0 0 0 0
and Chairman
of the Board
Anthony G.
Hargreaves, 12/31/98 * 0 0 0 0 0 0
Vice Pres., 12/31/99 * 0 0 0 0 0 0
Sec./Tres. 9/30/00 * 0 0 300000 0 0 0
and Director
David E.
Nelson, CPA 12/31/98 0 0 0 0 0 0 0
CFO and 12/31/99 0 0 0 0 0 0 0
Director 9/30/00 0 0 0 100000 0 0 0
Edward L.
Kunkel, Esq.12/31/98 0 0 0 0 0 0 0
Director 12/31/99 0 0 0 0 0 0 0
9/30/00 0 0 0 0 0 0 0
</TABLE>
Compensation Pursuant to Plans.
-------------------------------
We have no incentive or bonus plans.
38
<PAGE>
Pension Table.
--------------
We have no pension plans.
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.
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 "unregistered" and "restricted" shares 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, Merton Dick Van Orden will 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 will be 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.
Two other consultants will also be issued 50,000 and 5,000 shares,
respectively, for consulting services.
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, 2004.
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
39
<PAGE>
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, 1998, a total of $428,000 in salaries had accrued to
Messrs. Drees and Hargreaves; as of December 31, 1999, a total of $524,000 in
salaries had accrued; and as of September 30, 2000, a total of $569,000 in
salaries had accrued.
On September 24, 1996, our Board of Directors resolved to issue to Mr.
Hargreaves 529,358 "unregistered" and "restricted" shares in consideration of
prior services rendered over the previous six years.
On June 10, 2000, 300,000 shares were also issued to Mr. Hargreaves for
additional services valued at $75,000. These shares were registered on Form
S-8 of the Securities and Exchange Commission and are subject to lock-up
conditions 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 prospectus, 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 prospectus, 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:
40
<PAGE>
<TABLE>
<CAPTION>
Date Report Date Report
Filer Transaction Due Filed
----- ----------- --- -----
<S> <C> <C> <C>
Thomas C. Drees Disposition of 6/10/00 10/3/00
Ph.D. 230,000 shares
Anthony G. Acquisition of
Hargreaves 300,000 shares 6/10/00 10/3/00
</TABLE>
FINANCIAL STATEMENTS
--------------------
(i) Financial Statements for the years ended
December 31, 1999, 1998 and 1997
Independent Auditors Report
Balance Sheet - December 31, 1999 and 1998
Statements of Operations Accumulated for the
Period January 18, 1989 to December 31, 1999
and the Years ended December 31, 1999, 1998
and 1997
Statements of Stockholders' Equity January 1,
1990 to December 31, 1999
Statements of Cash Flows Accumulated for the
Period January 18, 1989 to December 31, 1999
and the Years Ended December 31, 1999, 1998
and 1997
Notes to Financial Statements
(ii) Financial Statements
September 30, 2000 and December 31, 1999
Balance Sheets
Statements of Operations
Statements of Cash Flows
Notes to the Financial Statements
41
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1999
&
December 31, 1998
42
<PAGE>
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Independent Auditors Report
Board of Directors
Sanguine Corporation
(A Development Stage Company)
I have audited the accompanying balance sheets of Sanguine Corporation, as of
December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the accumulated period of January 18,
1989 to December 31, 1999, and the years ended December 31, 1999, 1998, and
1997. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 the significant
estimates made by management, as well as evaluating the overall financial
statements presentation. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of Sanguine Corporation, as of
December 31, 1999 and 1998, and the results of its operations and its cash
flows for the accumulated period of January 18, 1989 to December 31, 1999, and
the years ended December 31, 1999, 1998, and 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note #9 to the financial
statements, the Company has an accumulated deficit and a negative net worth at
December 31, 1999. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note #9. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
April 11, 2000
43
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Balance Sheet
December 31, 1999 and 1998
<CAPTION>
1999
1998
Assets
<S> <C> <C>
Current Assets
Cash $ 1,062 $ 499
Property & Equipment
Furniture -0- 84
Total Assets $ 1,062 $ 583
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable $ 78,680 $ 14,154
Accrued Salaries 524,000 428,000
Accrued Interest Payable 38,880 33,420
Notes Payable 168,306 135,450
Total Current Liabilities 809,866 611,024
Stockholders' Equity
Common Stock, Authorized:
100,000,000 Shares at $0.001 Par Value:
23,162,994 & 23,010,217 Shares
Issued & Outstanding Respectively 23,163 23,010
Paid In Capital (Quasi-Reorganized
March 20, 1994 Deficit Retained
Earnings of $2,423,964 Eliminated) 877,444 858,096
Retained Earnings Deficit (1,709,411) (1,491,547)
Total Stockholders' Equity (808,804) (610,441)
Total Liabilities &
Stockholders' Equity $ 1,062 $ 583
</TABLE>
44
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Statements of Operations
Accumulated for the Period January 18, 1989 to December 31, 1999
and the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
Accumulated
January
18, 1989 to
December December December December
31, 1999 31, 1999 31, 1998 31, 1997
<S> <C> <C> <C> <C>
Revenues
Interest Income $ 4,842 $ -0- $ -0- $ -0-
Sales Market Rights 150,000 -0- -0- -0-
Total Revenues 154,842 -0- -0- -0-
Expenses
Depreciation $ 4,609 $ 84 $ 920 $ 920
Research & Development 865,805 78,000 198,000 79,000
Insurance 22,023 23,794 467 672
Office Expenses 93,253 12,627 9,585 8,987
Auto Expenses 26,919 9,922 990 1,170
Legal & Professional
Fees 141,231 19,067 30,550 9,773
Rent 98,791 12,564 17,596 16,000
Interest Expenses 69,827 16,746 16,732 10,255
Bad Debts 10,000 -0- -0- 10,000
Travel 20,725 7,570 136 -0-
Stock Transfer 4,829 300 1,770 618
Consultant Fees 297,520 -0- 63,710 9,633
Salaries & Wages 112,108 18,000 18,000 18,000
Taxes & Licenses 25,295 1,999 1,167 1,184
Finders Fees 7,825 -0- -0- -0-
Promotions 52,094 17,191 6,816 -0-
Total Expenses 1,852,854 217,864 366,439 166,212
Net Profit (Loss)
From Operations ($1,698,012) ($217,864) ($366,439) ($166,212)
Profit (Loss) Per Share ($.01) ($.02) ($.01)
Weighted Average Shares
Outstanding 23,078,735 21,943,900 20,877,723
</TABLE>
45
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Statement of Stockholders' Equity
January 1, 1990 to December 31, 1999
<CAPTION>
Common Shares Paid In Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance, January 1, 1990
Retroactively Restated 1,428,364 $ 1,428 $2,423,214 ($2,464,642)
Balance, December 31, 1990 1,428,364 1,428 2,423,214 ( 2,464,642)
Net Profit Year Ended
December 31, 1991 73,917
Balance, December 31, 1991 1,428,364 1,428 2,423,214 ( 2,390,725)
Shares Issued for Services
$0.001 Per Share 2,720 2
Contributed Capital by Officer 750
Net Loss Year Ended
December 31, 1992 ( 77,011)
Balance, December 31, 1992 1,431,084 1,430 2,423,964 ( 2,467,736)
Shares Issued to Acquire 94%
of Outstanding Shares of
Sanguine Corporation
(A California Corporation)14,589,775 14,590 (14,590)
Shares Issued for Cash
$.20 Per Share 500,000 500 99,500
Shares Issued for Cash
$1.00 Per Shares 10,000 10 9,990
Net Loss Year Ended
December 31, 1993 ( 92,895)
Balance, December 31,
1993 16,530,859 16,530 2,533,454 ( 2,575,221)
46
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Statement of Stockholders' Equity -Continued-
January 1, 1990 to December 31, 1999
<CAPTION>
Common Shares Paid In Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Quasi-Reorganization Restated
of Equity Accounts (2,423,964) 2,423,964
Cash Received of Exercise of
Option to Purchase Shares at
$.36 Per Share 175,000 175 62,825
Cash Received from Sale of
Stock at $.75 Per Share 16,000 16 11,984
Net Loss Year Ended
December 31, 1994 (230,779)
Balance, December 31,
1994 16,721,859 16,721 184,299 (382,036)
Shares Issued in Satisfaction
of Accounts Payable at
$0.17 Per Share 500,000 500 83,585
Shares Issued in Satisfaction
of Accounts Payable at
$.05 Per Shares 700,000 700 31,238
Shares Issued for Services
at $.125 Per Share 1,625,000 1,625 201,500
Shares Issued in
Satisfaction Notes Payable
at $.75 Per Share 16,000 16 13,225
Net Loss Year Ended
December 31, 1995 (366,843)
Balance, December 31,
1995 19,562,859 19,562 513,847 (748,879)
Shares Issued for Cash
$0.25 Per Share 10,000 10 2,490
47
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Statement of Stockholders' Equity -Continued-
January 1, 1990 to December 31, 1999
<CAPTION>
Common Shares Paid In Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Shares Issue for Services
$0.001 Per Share 450,000 450
Shares issued in Satisfaction
of Accrued Expenses
$0.25 Per Share 125,506 126 31,251
Shares Issued In Satisfaction
of Services Rendered $0.001
Per Share 529,358 529
Shares Issued in Satisfaction
of Accounts Payable $0.247
Per Share 200,000 200 49,354
Rounding ( 1)
Net Loss for Year Ended
December 31, 1996 (210,016)
Balance, December 31,
1996 20,877,723 20,877 596,942 (958,896)
Shares Issued for Services 100,000 100 9,234
Net Loss for Year Ended
December 31, 1997 (166,212)
Balance, December 31,
1997 20,977,723 20,977 606,176 (1,125,108)
Shares Issued for Services
$.025 Per Share 32,281 32 8,038
Shares Issued for Services
$0.25 Per Share 31,183 31 7,766
Shares Issued for Services
$0.25 Per Share 11,030 11 2,747
Shares Issued in Satisfaction
of Accounts Payable $0.21
Per Share 240,000 240 52,887
48
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Statement of Stockholders' Equity -Continued-
January 1, 1990 to December 31, 1999
<CAPTION>
Common Shares Paid In Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Shares Issued for Cash $0.13
Per Share 8,000 8 1,192
Shares Canceled ( 100,000) ( 100) 100
Share Issued for Services at
$0.10 Per Share 600,000 600 59,400
Shares Issued for Cash at
$0.10 Per Share 10,000 10 990
Shares Issued for Cash at
$0.10 Per Share 1,200,000 1,200 118,800
Rounding Adjustment 1
Net Loss for Year Ended
December 31, 1998 ( 366,439)
Balance, December 31,
1998 23,010,217 23,010 858,096 (1,491,547)
Shares Issued for Cash at
$0.19 Per Share 52,777 53 9,447
Shares Issued for Legal
Services at $0.10 Per Share 100,000 100 9,900
Net Loss for Year Ended
December 31, 1999 ( 217,864)
Balance, December 31,
1999 23,162,994 $23,163 $ 877,443 ($1,709,411)
</TABLE>
49
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Statements of Cash Flows
Accumulated for the Period January 18, 1989 to December 31, 1999
and the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
Accumulated
January
18, 1989 to
December December December December
31, 1999 31, 1999 31, 1998 31, 1997
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net (Loss) ($1,491,547) ($217,864) ($366,439) ($166,212)
Adjustments to Reconcile
Net (Loss) to Net Cash:
Rounding -0- 1 (2) -0-
Depreciation 4,525 84 920 920
Non Cash Expense 427,801 10,000 78,625 19,334
Changes in Operating Assets & Liabilities:
Increase (Decrease)
Accounts Payable 14,154 64,526 31,722 10,189
Increase in Interest
Payable 33,420 5,460 5,460 5,460
Increase in Accrued
Salaries 428,000 96,000 96,000 96,000
Net Cash Flows from
Operating Activities (583,647) ( 41,793) ( 153,714) ( 34,309)
Cash Flows from Investing Activities
Purchase of Equipment (4,609) -0- -0- -0-
Cash Flows from Financing Activities
(Decrease) Increase in
Notes Payable 135,450 32,856 31,750 33,900
Sale of Common Stock 452,555 9,500 122,200 -0-
Contributed Capital 750 -0- -0- -0-
Net Cash Flows from
Financing Activities 588,755 42,356 153,950 33,900
Increase (Decrease) in Cash 499 563 236 ( 409)
Cash at Beginning of Period -0- 499 263 672
Cash at End of Period $ 499 $1,062 $ 499 $ 263
Disclosure for Cash Flows from
Interest $ 69,827 $16,746 $16,732 $ 10,255
Taxes -0- -0- -0- -0-
Disclosures from Non Cash Transactions
Operating Activities
Payment of Accounts Payable $ -0- $ -0- $49,930 $ -0-
Issued Shares for Services -0- 10,000 78,625 9,333
</TABLE>
50
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE #1 - Corporate History
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 stated purpose of the Company is to engage without qualification, in any
lawful acts, or activity for which a corporation may be organized under the
laws of the state of Nevada. Currently, the Company is engaged in developing
artificial blood to be used by the medical profession. The Company is
conducting research and development leading to FDA clinical trials.
The Company forward split its outstanding shares 1.5 shares for 1 on July 14,
1993. As a consequence of this action, the Company had 1,431,000 shares
issued and outstanding prior to the Agreement and Plan of Reorganization in
which Sanguine Corporation (a California Corporation) was acquired.
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).
From 1974 to 1989, the Company engaged in several business ventures. These
business activities resulted in the loss of all Company assets. Because of
the search for a new business venture, the Company has entered into the
"development stage company" status again. Sanguine Corporation (California)
is a development stage company and these financial statements are presented as
those of a development stage company effective January 18, 1989, coinciding
with the incorporation date of Sanguine Corporation (California).
NOTE #2 - Significant Accounting Policies
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period when
the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments that are
readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Primary Earnings Per Share amounts are based on the weighted average
number of shares outstanding at the dates of the financial statements.
Fully Diluted Earnings Per Shares shall be shown on stock options and
other convertible issues that may be exercised within ten years of the
financial statement dates.
E. Inventories: Inventories are stated at the lower of cost, determined
by the FIFO method or market.
51
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #2 - Significant Accounting Policies -Continued-
F. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of leasehold
improvements is depreciated (amortized) over the lesser of the length of
the related assets or the estimated lives of the assets. Depreciation
is computed on the straight line method for reporting purposes and for
tax purposes.
G. Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
NOTE #3 - Common Stock Public Offering
In June of 1974, the Company completed a public offering of 3,000,000 shares
of its common stock at $0.02 per share.
NOTE #4 - Net Operating Losses for Tax Carryforward
The Company had net operating losses to carryforward to years expiring in
1985. Sanguine Corporation (California) has had operating losses to
carryforward as scheduled below.
Year of Expiration
Loss Amount Date
1992 $ 3,094 2007
1993 149,162 2008
1995 186,779 2009
1995 165,343 2010
1996 209,488 2016
1997 156,878 2017
1998 366,439 2018
1999 217,864 2019
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expenses. Net operating losses would create possible tax assets
in future years. Due to the uncertainty as to the utilization of net
operating loss carryforwards an evaluation allowance has been made to the
extent of any tax benefit that net operating losses may generate.
1999 1998 1997
Current Tax Asset Value of Net Operating Loss
Carryforwards at Current Prevailing Federal
Tax Rate $ 494,717 $ 420,643 $ 296,053
Evaluation Allowance (494,717) (420,643) (296,053)
Net Tax Assets $ -0- $ -0- $ -0-
Current Income Tax Expense -0- -0- -0-
Deferred Income Tax Expense -0- -0- -0-
52
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #5- Notes Payable - Short Term
The Company has three notes payable to three entities.
Amounts
1999 1998
Note #1 to an individual, due on demand, interest
at 10% per annum, with option to the holder to
convert to 35,277 shares of common stock to $0.4252
per share. $ 15,000 $ 15,000
Note #2 to a partnership, due on demand, but not
later than August 10, 1994, at 12% per annum interest. 25,000 25,000
Note #3 to an individual, (related party) due on
demand, interest at 12% per annum. 128,306 95,450
Total Current Notes Payable $168,306 $135,450
NOTE #6 - Property & Equipment
The Company capitalized the purchase of equipment and fixtures for major
purchases in excess of $1,000 per item. Capitalized amounts are depreciated
over the useful life of the assets using the straight-line method of
depreciation.
Scheduled below are the assets, costs, lives, and accumulated depreciation at
December 31, 1999 and 1998.
December 31, Depreciation Accumulated
1999 1998 Expense Depreciation
Assets Cost Cost Life 1999 1998 1999 1998
Furniture $ 4,609 $ 4,609 5 $ 84 $ 920 $4,609 $4,525
NOTE #7 - Stock Option
The Company has set aside 1,500,000 shares of its common stock options at a
price not to exceed $5.00 per share. The Corporation has issued 893,449
warrants as follows:
587,715 at $0.8504 per share.
305,734 at $0.4252 per share.
The exercise period of warrants issued expired in August 1998 with no warrants
being exercised.
Pursuant to the Agreement and Plan of Reorganization dated June 14, 1993, the
Company issued an option to purchase 470,642 shares of its common stock at
$0.1275 per share. The option has been extended by the Company and expires on
September 22, 2001. The option issued by Sanguine Corporation (Nevada
Corporation) replaced options issued by the California Corporation to an
officer
53
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #7 - Stock Option -Continued-
as part of his compensation for services. When the option was issued by the
Company the shares of the Company had no market value.
On November 10, 1995, the Company issued an option to its legal counsel for
200,000 shares at $.25 per share for a period of five years. In 1996 and 1998
counsel exercised its option to purchase the 200,000 shares at $0.25 per
share.
On September 23, 1998, the Company issued an option to its legal counsel for
100,000 shares at $0.10 per share for a period of three years from the date of
the grant. The Company's counsel exercised the option for the 100,000 shares
at $10,000 for services.
NOTE #8 - Lease Commitment
The Company rents office space on a month to month arrangement for $1696.
The total annual cost of the space is $19,764. At the present time the
Company's President reimburses the Company $601 each month for space he
utilizes for non company purposes.
NOTE #9 - Going Concern
The Company had an accumulated deficit of $1,709,411 at December 31, 1999 and
negative cash flows for the year and the proceeding year. Until the Company
commences business operations, management anticipates that negative cash flows
will continue. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The Company seeks to find a business
opportunity to acquire or merge with that will provide operating capital.
NOTE #10 - Minority Interest
Sanguine Corporation (California) had a total of 6,586,800 shares of its
common stock issued and outstanding. 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 represents 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 stockholder's equity.
NOTE #11 - Employment Agreement
The Company has employment agreements with Dr. Thomas Drees and Anthony G.
Hargreaves dated January 22, 1990. The agreements call for a base salary of
$120,000 to Dr. Drees and $72,000 to Mr. Hargreaves annually. Insurance
benefits, home office reimbursement, and an automobile are to be provided by
the Company and reimbursement for out of pocket expenses will be paid to Dr.
Drees and Anthony G. Hargreaves. Subject to an agreement of June 2, 1994, Dr.
Drees and Mr. Hargreaves agreed to cancel all outstanding accruals for
expenses under the provision of the Agreements and to accept as full
satisfaction of all of their claims against Sanguine Corporation the
54
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #11 - Employment Agreement -Continued-
payments they received in November 1993. In addition the 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 Agreements. Commencing
September 1, 1994, Dr. Drees and Mr. Hargreaves will be entitled to receive
one half the salary specified until such time as Sanguine Corporation shall
have raised $1,500,000 in debt or equity funding. All funds raised since the
completion of the Agreement and Plan of Reorganization between Sanguine
Corporation (California), and Sanguine Corporation (Nevada), are being counted
in arriving at this sum.
NOTE #12 - Non Cash Investing & Financing Activities
In 1993, the Company issued 14,589,775 shares of its common stock to finance
the acquisition of Sanguine Corporation (a California Corporation).
In 1995, the Company issued 1,625,000 shares of its common stock at par value
in payment of services received from several vendors.
In 1996, the Company issued 450,000 shares of stock for services valued at
$450 and 854,864 shares for settlement of accounts payable and accrued
expenses.
In 1997, the Company issued 100,000 shares of its common stock for services
rendered to the Company valued at $9,334.00.
In 1998, the Company issued 674,494 shares of its common stock for services
valued at $78,625. The Company issued 240,000 shares of its common stock for
satisfaction of accounts payable valued at $49,930.
In 1999, the Company issued 100,000 shares of its common stock for legal
services valued at $10,000.
NOTE #13 - Subsequent Events
In March of 2000, the Company agreed to grant options to purchase shares of
common stock to the following; to the Company's Legal Counsel the option to
purchase 300,000 shares, an Officer of the Company the option to purchase
100,000 shares and an unrelated party the option to purchase 700,000 shares
of common stock. The Option price of the shares is $0.25 per share and may be
exercised for 180 days from the grant date.
55
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Index to Financial Statements
Page
Balance sheet, September 30, 2000 (unaudited) F-1
Statement of operations for the three
months and nine months ended September 30,
2000 and 1999 (unaudited) and for the
period from January 18, 1989 (date of
inception) to September 30, 2000 (unaudited) F-2
Statement of cash flows for the nine months
ended September 30, 2000 and 1999 (unaudited)
and for the period from January 18, 1989
(date of inception) to September 30, 2000 (unaudited) F-3
Notes to financial statements F-5
56
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Balance Sheet
September 30, 2000 (Unaudited)
<S> <C>
Assets
Current assets:
Cash $660,374
Total assets $660,374
Liabilities and Stockholders' Deficit
Current liabilities:
Related party accounts payable $129,394
Accrued salaries 569,000
Accrued interest payable 51,949
Deferred revenue 83,875
Notes payable 258,271
Total current liabilities 1,092,489
Stockholders' deficit:
Common stock - par value $.001 per share.
Authorized 100,000,000 shares; issued
and outstanding 27,881,188 shares 27,881
Additional paid-in capital (Quasi-
reorganized March 20, 1994 deficit
retained earnings of $2,423,964
eliminated) 1,835,547
Deficit accumulated during the
development stage (2,295,543)
Total stockholders' deficit (432,115)
Total liabilities and stockholders'
deficit $660,374
</TABLE>
57
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Statement of Operations (Unaudited)
<CAPTION>
Cumulative
Three Months Ended Nine Months Ended Amounts
September 30, September 30, From
2000 1999 2000 1999 Inception
<S> <C> <C> <C> <C> <C>
Revenue $ 7,625 $ - $ 7,625 $ - $162,467
Expenses:
Promotion - 12,965 3,805 17,191 55,899
Depreciation - - - 84 4,609
Research &
Development 16,800 19,500 55,800 58,500 921,605
Office expense 2,171 4,193 8,840 12,724 102,093
Auto expense 2,091 2,905 6,392 7,836 33,311
Salaries 8,500 4,500 17,500 13,500 129,608
Legal & Professional
fees 8,445 6,616 77,454 17,447 218,685
Rent 3,356 3,155 9,560 9,344 108,351
Interest expense 6,691 5,425 31,809 15,382 101,636
Stock transfer - - - 300 4,829
Taxes & License 4,537 80 6,372 1,673 31,667
Travel 5,707 - 12,277 - 33,002
Insurance 2,165 6,158 4,448 18,782 26,471
Consulting 92,000 - 359,500 - 657,020
Bad debt - - - - 10,000
Finder fees - - - - 7,825
Total expenses 152,463 65,497 593,757 172,763 2,446,611
Loss before income
taxes (144,838) (65,497) (586,132) (172,763) (2,284,144)
Income tax expense - - - - -
Net loss $(144,838)$(65,497)$(586,132)$(172,763)$(2,284,144)
Loss per share $ (.01)$ - $ (.02)$ (.01)$ (.17)
Weighted average
number of shares
outstanding 25,256,445 23,067,994 24,106,461 23,067,994 13,162,766
</TABLE>
58
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Statement of Cash Flows (Unaudited)
<CAPTION>
Cumulative
Nine Months Ended Amounts
September 30, From
2000 1999 Inception
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(586,132) $(172,763) $(2,295,543)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation - 84 4,609
Non cash expenses 419,500 - 857,302
Changes in operating asset & liabilities:
(Decrease) increase in accounts payable 50,714 62,225 129,394
Increase in interest payable 13,069 4,095 51,949
Increase in accrued salaries 45,000 72,000 569,000
Increase in deferred revenue 83,875 - 83,875
Net cash provided by (used in)
operating activities (26,026) (34,359) (599,414)
Cash flows from investing activities -
purchase of equipment - - (4,609)
Net cash used in
investing activities - - (4,609)
Cash flows from financing activities:
Net (payment on) proceeds from
notes payable (2,035) 25,356 166,271
Sales of common stock 635,321 9,500 1,097,376
Contributed capital - - 750
Net cash provided by
financing activities 633,286 34,856 1,264,397
Net increase (decrease) in cash 659,312 497 660,374
Cash, beginning of period 1,062 499 -
Cash, end of period $660,374 $ 996 $660,374
</TABLE>
59
<PAGE>
<TABLE>
SANGUINE CORPORATION
(A Development Stage Company)
Statement of Cash Flows (Unaudited)
Continued
<CAPTION>
Cumulative
Nine Months Ended Amounts
September 30, From
2000 1999 Inception
<S> <C> <C> <C>
Supplemental disclosure of cash flow
information:
Interest paid $ - $15,382 $86,573
Income taxes paid $ - $ - $ -
</TABLE>
60
<PAGE>
SANGUINE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 2000
1. Corporate History
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 stated purpose of the Company is to engage without
qualification, in any lawful acts, or activity for
which a corporation may be organized under the laws of
the state of Nevada. Currently, the Company is
engaged in developing artificial blood to be used by
the medical profession. The company is conducting
research and development leading to FDA clinical
trials.
The Company forward split its outstanding shares 1.5
shares for 1 on July 14, 1993. As a consequence of
this action, the Company had 1,431,000 shares issued
and outstanding prior to the Agreement and Plan of
Reorganization in which Sanguine Corporation (a
California Corporation) was acquired.
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 issued 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).
From 1974 to 1989, the Company engaged in several
business ventures. These business activities resulted
in the loss of all Company assets. Because of the
search for a new business venture, the Company has
entered into the "development stage company" status
again. Sanguine Corporation (California) is a
development stage company and these financial
statements are presented as those of a development
stage company effective January 18, 1989, coinciding
with the incorporation date of Sanguine Corporation
(California).
61
<PAGE>
2. 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,
1999 Annual Report on Form 10-KSB. The results of
operations for the period ended September 30, 2000 are
not necessarily indicative of the operating results
for the full year.
3. Deferred Revenue
During the period ended September 30, 2000, the Company received
$91,500 for the sale of the rights to represent the Company and to
receive a 1% royalty on sales in Greece for a period of three years.
Accordingly, the revenue associated with this agreement will be
recognized over the three year term. As of September 30, 2000, a
balance of $83,875 remained in deferred revenue.
4. Related Party Loan
During the period ended September 30, 2000, the Company retained
Starpoint Procurement Company as a marketing and joint venture
corporate advisor in exchange for $92,000. The payment of $92,000
was made by an officer of the Company and is therefore reflected as
a note payable at September 30, 2000.
5. Private Placement
During September 2000, the Company closed a Private Placement
Offering Agreement with Laidlaw Global Securities, Inc. The
amount of securities subscribed for and accepted was
$817,985 for 1,635,970 units. Each unit consists of
two shares of common stock at $0.001 par value per
share, and one redeemable common stock purchase
warrant entitling the holder to purchase one share of
common stock. The warrants are exercisable at $0.40
per share and expire on August 29, 2004. Net proceeds
received after offering expenses was $611,421.
6. Subsequent Event
In June 2000, the Company entered into an agreement to grant
warrants to purchase twelve million shares of common stock at an
exercise price of $0.30 in relation to consulting services. The
warrant grant was approved by the board of directors on November 10,
2000, and amended to reduce the exercise period from five years to
one year after the registration of such warrants. In addition, the
exercise price was reduced from $0.30 per share to $0.25 per share.
A significant expense of approximately $4.5 million related to the
grant of these warrants will be recorded in the fourth quarter when
the grant was approved by the board of directors.
62
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
----------
Schvaneveldt and Company, Certified Public Accountants, of Salt Lake
City, Utah, audited our financial statements for the calendar years ended
December 31, 1999, 1998 and 1997. These financial statements accompanied our
Annual Reports on Form 10-KSB for the calendar years ended December 31, 1999,
1998 and 1997, which we have previously filed with the Securities and Exchange
Commission.
Darrell T. Schvaneveldt, CPA, who owned and operated Schvaneveldt and
Company as a sole proprietorship, died on September 8, 2000.
During our two most recent calendar years, and since then, our principal
independent accountant had not resigned or declined to stand for re-election,
and we have not dismissed any principal independent accountant during that
period.
On September 18, 2000, our Board of Directors unanimously resolved to
engage Tanner + Co., Certified Public Accountants, of Salt Lake City, Utah, to
audit the our financial statements for the calendar year ended December 31,
2000.
There were no disagreements between us and Schvaneveldt and Company,
whether resolved or not resolved, on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure
which, if not resolved, would have caused it to make reference to the subject
matter of the disagreement in connection with its reports.
The reports of Schvaneveldt and Company did not contain any adverse
opinion or disclaimer of opinion, and with the exception of a "going concern"
qualification for a development stage company, were not qualified or modified
as to uncertainty, audit scope or accounting principles.
During our three most recent calendar years, and since then, neither
Schvaneveldt and Company nor Tanner + Co., has advised us that any of the
following exists or is applicable:
(1) That the internal controls necessary for us to develop
reliable financial statements do not exist, that
information has come to their attention that has led them
to no longer be able to rely on management's
representations or that has made them unwilling to be
associated with the financial statements prepared by
management;
(2) That the they need to expand significantly the scope
of their audits, or that information has come to their
attention that if further investigated may materially impact
the fairness or reliability of a previously issued audit
report or the underlying financial statements or any other
financial presentation or cause them to be unwilling to
rely on management's representations or be associated with
our financial statements for the foregoing reasons or any
other reason; or
63
<PAGE>
(3) That they have advised us that information has come to their
attention that they have concluded materially impacts the
fairness or reliability of either a previously issued audit
report or the underlying financial statements for the
foregoing reasons or any other reason.
During our three most recent calendar years and since then, we have not
consulted Tanner + Co. regarding the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on our financial statements or any other
financial presentation whatsoever.
You may rely only on the information contained in this prospectus. We
have not authorized anyone to provide information different from that
contained in this prospectus. Neither the delivery of the prospectus nor the
sale of common stock means that information contained in this prospectus is
correct after the date of this prospectus. This prospectus is not an offer to
sell or a solicitation of an offer to buy these shares of common stock in any
circumstances under which the offer or solicitation is unlawful.
AVAILABLE INFORMATION
---------------------
We file periodic reports with the Securities and Exchange Commission.
You may inspect and copy these documents at the Public Reference Room of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for additional information. Our Securities and Exchange
Commission filings are also available on its web site: http://www.sec.gov.
We have filed a registration statement with the Securities and Exchange
Commission on Form SB-2, under the Securities Act, with respect to the
securities described in this prospectus. This prospectus is filed as part of
the registration statement. It does not contain all of the information set
forth in the registration statement and the exhibits and schedules filed with
it. For further information about us and the common stock described by this
prospectus, we refer you to the registration statement and to the exhibits and
schedules filed with it. You may inspect or copy these documents at the
Public Reference Branch or on the Securities and Exchange Commission's web
site.
You may wish to examine our 8-K and 8-KA Current Reports dated June 8,
2000, for further information about the Westbury warrants; and our 8-K Current
Report dated September 1, 2000, for further information about the Laidlaw
Private Offering.
64
<PAGE>
DEALER PROSPECTUS DELIVERY OBLIGATION
-------------------------------------
Until March 13, 2001, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
65
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors And Officers.
------------------------------------------
Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes a
Nevada corporation to indemnify any director, officer, employee or corporate
agent "who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation" due to his or her corporate role. Section 78.751(1)
extends this protection "against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit or proceeding if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the
right of the corporation. The party must have been acting in good faith and
with the reasonable belief that his or her actions were not opposed to the
corporation's best interests. Unless a court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee or agent is
successful on the merits or otherwise in defending any action or proceeding
referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS
requires that he or she be indemnified "against expenses, including attorneys'
fees, actually and reasonably incurred by him or her in connection with the
defense."
Section 78.751(4) of the NRS limits indemnification under Sections
78.751(1) and 78.751(2) to situations in which either (1) the stockholders,
(2)the majority of a disinterested quorum of directors, or (3) independent
legal counsel determine that indemnification is proper under the
circumstances.
65
Pursuant to Section 78.751(5) of the NRS, the corporation may advance an
officer's or director's expenses incurred in defending any action or
proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides that
the rights to indemnification and advancement of expenses shall not be deemed
exclusive of any other rights under any bylaw, agreement, stockholder vote or
vote of disinterested directors. Section 78.751(6)(b) extends the rights to
indemnification and advancement of expenses to former directors, officers,
employees and agents, as well as their heirs, executors and administrators.
Regardless of whether a director, officer, employee or agent has the
right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his or her behalf against liability resulting from his
or her corporate role.
Article V of our Bylaws requires us to indemnify our directors and
executive officers, former directors and executive officers and directors and
executive officers of subsidiaries against expenses necessarily incurred by
them in defending any action in which they are made parties due to their
service as directors or executive officers, except in relation to matters as
to which such directors or executive officers are adjudged to be liable for
negligence or misconduct.
Each of the Employment Agreements between Sanguine California and Dr.
Drees Mr. provides for the payment by the losing party of attorneys' fees,
costs and other necessary disbursements incurred by the prevailing party in
any litigation or arbitration necessary to enforce or interpret the terms of
that Employment Agreement.
Item 25. Other Expenses of Issuance And Distribution.
--------------------------------------------
The following table sets forth the expenses which we expect to incur in
connection with the registration of the shares of common stock being
registered by this Registration Statement. All of these expenses, except for
the Commission registration fee, are estimated:
Securities and Exchange Commission registration fee........$ 2,189.09
Legal fees and expenses....................................$50,000*
Accounting fees............................................$ 3,500
Printing and engraving expenses............................$ 1,000
Blue Sky Filings...........................................$ 4,000
Transfer agent fees........................................$ 500
Miscellaneous..............................................$ 500
Total................................................$61,689.09*
* Does not take into account the $15,000 that is
required to be paid by Westbury, which would
result in these expenses being $46,689.09.
66
Item 26. Recent Sales of Unregistered Securities.
----------------------------------------
We have sold the following "restricted securities" during the past three
calendar years:
Aggregate
Name Number of Shares Date Consideration
---- ---------------- ---- -------------
SCS, Inc. 240,000 6/19/98 $ 53,127
Various subscribers 66,494 8/01/98 $ (1)
Four subscribers 1,216,000 9/24/98 $124,000
under Rule 506
offering
Sunrise Financial, 600,000 10/26/98 $ 60,000
Inc.
Tyler Zinck and 18,000 11/02/98 $ 3,240
Robert L. Ganzhorn
Nine subscribers 52,777 4/28/99 $ 9,499
under Rule 506
offering
12 subscribers 46,329 5/31/00 $ 13,898.70
under Rule 506
offering
Westbury 12,000,000 6/08/00 $ (2)
Consultancy Services
Ltd.
Four subscribers 1,635,970 (3) 9/1/00 $817,985
under Laidlaw
Offering
(1) Various prices from $0.10 to $0.25 per share in cash and/or
services.
(2) In June 2000, the Company entered into an agreement to grant
warrants to purchase 12,000,000 shares of common stock at an exercise price of
$0.30 in relation to consulting services. The warrant grant was approved by
our Board of Directors on November 10, 2000, and amended to reduce the
exercise period from five years to one year from the effective date of this
registration statement. In addition, the exercise price was reduced from $0.30
per share to $0.25 per share. A significant expense of approximately
$4,500,000 related to the grant of these warrants will be recorded in the
fourth quarter which is when the grant was approved by the Board of Directors.
(3) We sold 1,635,970 units though Laidlaw Global Securities. 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 this registration statement was not filed within 30 days of the
closing of the Laidlaw Private Offering.
67
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
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.
Item 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ ------------
<S> <C>
2.1 Articles and Agreement of Merger whereby 10-SB
the Company changed its domicile from the
State of Utah to the State of Nevada and
effecting a one for twenty reverse split
of its outstanding voting securities,
effective July 13, 1992.*
2.2 Agreement and Plan of Reorganization between 10-SB
us and Sanguine Corporation, a California
corporation, effective June 14, 1993.*
3.1 Initial Predecessor Articles of Incorporation 10-SB
filed January 24, 1974.*
3.2 Amendment to Predecessor Articles of 10-SB
Incorporation filed July 8, 1974, reflecting
a name change to "Kricket Corporation."*
3.3 Amendment to Predecessor Articles of 10-SB
Incorporation filed October 13, 1977,
increasing the authorized capital to
$250,000.*
3.4 Amendment to Predecessor Articles of 10-SB
Incorporation filed December 22, 1986,
increasing the authorized capital to
$1,000,000.*
68
3.5 Amendment to Predecessor Articles of 10-SB
Incorporation filed December 5, 1977,
reflecting a name change to "International
Health Resorts, Inc."*
3.6 Initial Articles of Incorporation of 10-SB
International Health Resorts, Inc.,
a Nevada corporation ("International
Nevada," now our Article of Incorporation)
filed February 5, 1992.*
3.7 Bylaws of International Nevada (now the 10-SB
Our Bylaws).*
3.8 Certificate of Amendment to our 10-SB
Articles of Incorporation reflecting a name
change to "Sanguine Corporation" effective
June 25, 1993, and effecting a 1.5 for one
forward split of our outstanding common stock,
effective June 28, 1993.*
3.9 Certificate of Amendment to our 10-SB
Articles of Incorporation decreasing the
required number of directors from a
minimum of three to not less than one
director, effective November 10, 1993.*
5 Opinion of Branden T. Burningham, Esq.
regarding legality.*
10.1 License Agreement between Sanguine Corporation, 10-SB
a California corporation ("Sanguine California"
[a majority owned subsidiary of the Company]),
and BioLogix Development Partners, a California
limited partnership, dated March 28, 1991.*
10.2 First Amendment to the License Agreement between 10-SB
Sanguine California and BioLogix Development
Partners, dated September 28, 1991.*
10.6 Employment Agreement with Dr. Thomas C. Drees.* 10-SB
10.7 Employment Agreement with Anthony G. Hargreaves.* 10-SB
21 Subsidiaries of the Registrant.*
23 Consent of Branden T. Burningham, Esq.*
27 Financial Data Schedule.
99.2 8-K Current Report dated June 8, 2000, regarding
Westbury Warrant Agreement.*
99.3 8-KA Current Report dated June 8, 2000, regarding
amendments to the Westbury Warrant Agreement.*
99.3 8-K Current Report dated September 1, 2000, regarding
the Laidlaw Private Offering.*
99.3 8-K Current Report dated September 18, 2000,
regarding the death of our independent accountant
and the selection of replacement independent
auditors.*
69
Item 28. Undertakings
------------
Sanguine hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and, notwithstanding the foregoing, any increase
or decrease in volume of securities offered, if the total dollar value of
securities offered would not exceed that which was registered, and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, executive officers
and controlling persons the foregoing provisions or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against
these liabilities, other than our payment of expenses incurred or paid by any
of our directors, executive officers or controlling persons in the successful
defense of any action, suit or proceeding, is asserted by the director,
executive officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of that issue.
SIGNATURES
----------
In accordance with the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing of Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of Pasadena, State of California, on October 31, 2000.
SANGUINE CORPORATION
Date: December 7, 2000 By /s/ Thomas C. Drees
---------------- -------------------------------------
Thomas C. Drees, Ph.D., MBA
Chairman, CEO and President
In accordance with the requirements of the Securities Act, this
registration statement was signed by the following persons in the
capacities and on the dates stated.
Date: December 7, 2000 By /s/ Thomas C. Drees
---------------- -------------------------------------
Thomas C. Drees, Ph.D., MBA
Chairman, CEO and President
Date: December 7, 2000 By /s/ Anthony G. Hargreaves
---------------- -------------------------------------
Anthony G. Hargreaves, Vice Chairman,
Vice President, Secretary/Treasurer
and Director
Date: December 6, 2000 By /s/ David E. Nelson
---------------- ------------------------------------
David E. Nelson, CPA
CFO and Director
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SANGUINE CORPORATION
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