**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

**FORM 10-Q**

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________

Commission File Number 000-24480

                                           

Sanguine Corporation

(Exact name of registrant as specified in its charter)

Nevada

95-4347608

(State or other jurisdiction of

(IRS Employer Identification No.)

incorporation or organization)

110 Founders Mill Ct., Roswell Georgia

  

  30075

 (Address of principal executive offices)  (Zip Code)

(678) 352-9060

 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                                                                                                                Yes [X]   No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  The registrant is not yet part of the Interactive Data reporting system.

Yes [  ]  No  [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer  ̈

Accelerated filer  ̈

Non-accelerated filer   ̈ (Do not check if a smaller reporting company)

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]   No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

6,704,572 shares of $0.001 par value common stock on May 19, 2011

----

**Part I - FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**Sanguine Corporation**

FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2011

The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made.  These financial statements should be read in conjunction with the accompanying notes, and with the historical financial information of the Company.

2

----

**SANGUINE CORPORATION & SUBSIDIARY**

(A Development Stage Company)

Consolidated Balance Sheets

ASSETS

|  

March 31,

2011

 

December 31,

2010

 

 

(Unaudited)

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

Cash

$

14,797

$

1,195

Accounts receivable

 

-

 

28,000

 

 

 

 

 

  Total Current Assets

 

14,797

 

29,195

 

 

 

 

 

PROPERTY AND EQUIPMENT, NET

 

418

 

463

 

 

 

 

 

 

 

 

 

 

     TOTAL ASSETS

$

15,215

$

29,658

The accompanying notes are an integral part of these consolidated financial statements. 

3

**SANGUINE CORPORATION & SUBSIDIARY**

(A Development Stage Company)

Consolidated Balance Sheets (Continued)

LIABILITIES AND SHAREHOLDERS’ DEFICIT

 

 

March 31,

2011

 

December 31,

2010

 

 

(Unaudited)

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Accounts payable

$

260,541

$

244,359

Accrued interest

 

3,360

 

2,330

Related party payable

 

219,641

 

182,675

Notes payable

 

66,700

 

29,700

Accrued compensation

 

-

 

6,075

 

 

 

 

 

  Total Current Liabilities

 

550,242

 

465,139

 

 

 

 

 

     Total Liabilities

 

550,242

 

465,139

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

Preferred stock, 10,000,000 shares authorized of

  $0.001 par value, 150,000 shares issued and

   outstanding, respectively

 

150

 

150

Common stock, 200,000,000 shares authorized of 

  $0.001 par value, 6,704,572 and 6,682,072 shares 

   issued and outstanding, respectively

 

6,705

 

6,682

Additional paid in capital

 

9,694,836

 

8,697,935

Preferred stock subscribed

 

8,500

 

8,500

Deficit accumulated during the development stage

 

(10,245,218)

 

(9,148,748)

 

 

 

 

 

   Total Shareholders’ Deficit

 

(535,027)

 

(435,481)

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ 

  DEFICIT

$

15,215

$

29,658

The accompanying notes are an integral part of these consolidated financial statements. 

4

**SANGUINE CORPORATION & SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Operations

(Unaudited)

 

For the Three Months Ended 

March 31,

 

From Inception of the Development Stage on January 18, 1990 through March 31

 

2011

 

2010

 

2011

REVENUES

$

-

  $

-

  $

224,732

 

 

 

 

 

 

 

COST OF SALES

 

-

 

-

 

18,297

 

 

 

 

 

 

 

GROSS PROFIT

 

-

 

-

 

206,435

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

  Professional fees

 

54,186

 

47,355

 

5,469,968

  Research and development

 

10,870

 

-

 

1,984,028

  Stock based compensation

 

984,975

 

-

 

984,975

  Selling, general and administrative

 

42,087

 

7,245

 

2,921,303

 

 

 

 

 

 

 

     Total Operating Expenses

 

1,092,118

 

54,600

 

11,360,274

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

(1,092,118)

 

(54,600)

 

(11,153,839)

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

  Interest income

 

-

 

-

 

40,195

  Interest expense

 

(4,352)

 

(2,794)

 

(692,289)

  Gain (loss) on foreign currency exchange

 

-

 

6,024

 

(9,099)

  Loss on cash deposit

 

-

 

-

 

(10,020)

  Gain on settlement of debt

 

-

 

-

 

1,579,834

 

 

 

 

 

 

 

     Total Other Income (Expense)

 

(4,352)

 

3,230

 

908,621

 

 

 

 

 

 

 

NET LOSS BEFORE PROVISION FOR INCOME TAX

 

(1,096,470)

 

(51,370)

 

(10,245,218)

 

 

 

 

 

 

 

PROVISION FOR INCOME TAX

 

-

 

-

 

-

 

 

 

 

 

 

 

NET LOSS

$

(1,096,470)

  $

(51,370)

  $

(10,245,218)

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS PER SHARE

$

(0.16)

  $

(0.01)

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING –BASIC AND DILUTED

 

6,693,322

 

6,682,072

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5

**SANGUINE CORPORATION & SUBSIDIARY**

(A Development Stage Company)

 Consolidated Statements of Cash Flows

(Unaudited)

 

For the Three Months Ended 

March 31,

 

From Inception of the Development Stage on January 18, 1990 through  March 31

 

 

2011

 

2010

 

2011

Net loss

$

(1,096,470)

  $

(51,370)

  $

(10,245,218)

Adjustments to reconcile net loss to net cash used by operating activities:

 

 

 

 

 

 

  Depreciation and amortization

 

45

 

119

 

6,578

  Common stock issued for services

 

-

 

-

 

3,365,446

  Contributed capital

 

3,324

 

2,636

 

21,464

  Stock options granted

 

987,525

 

-

 

987,525

  Stock warrants granted

 

-

 

-

 

8,650

  Interest on beneficial conversion feature

 

-

 

-

 

25,000

  Legal expense related to beneficial conversion feature

 

-

 

-

 

3,750

  Note payable issued for services

 

-

 

-

 

727,950

  Gain on extinguishments of debt

 

-

 

-

 

(181,753)

  Gain on conversions of debt to equity

 

-

 

-

 

(1,398,081)

  Recognition of expenses prepaid with common stock

 

-

 

-

 

456,184

  Warrant extension

 

-

 

-

 

34,493

    Gain (loss) on foreign currency exchange

 

-

 

(6,024)

 

9,099

Changes in assets and liabilities:

 

 

 

 

 

 

  Decrease in accounts receivable

 

28,000

 

-

 

-

  Decrease in prepaid expense

 

-

 

27,961

 

1,198,717

  Increase in accounts payable and related party payables

 

53,148

 

17,371

 

843,737

  Increase in accrued interest payable

 

1,030

 

158

 

550,640

  Increase in accrued liabilities

 

-

 

-

 

10,125

  Increase in customer deposits

 

-

 

-

 

45,000

  Increase in accrued salaries

 

-

 

831

 

987,661

      Net Cash Used by Operating Activities

 

(23,398)

 

(8,318)

 

(2,543,033)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

  Cash paid for fixed assets

 

-

 

-

 

(6,995)

      Net Cash Used by Investing Activities

 

-

 

-

 

(6,995)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

  Proceeds from warrant conversion

 

-

 

-

 

524,700

  Proceeds from notes payable and notes payable-related party

 

37,000

 

-

 

296,800

  Payments on notes payable and notes payable –related party

 

-

 

-

 

(22,900)

  Proceeds from issuance of convertible debentures

 

-

 

-

 

40,000

  Contributed capital

 

-

 

-

 

750

  Preferred stock subscription

 

-

 

8,500

 

33,500

  Preferred stock issued for cash

 

-

 

-

 

125,000

  Common stock issued for cash

 

-

 

-

 

1,566,975

      Net Cash Provided by Financing Activities

 

37,000

 

15,116

 

2,564,825

NET INCREASE (DECREASE) IN CASH

 

13,602

 

182

 

14,797

CASH AT BEGINNING OF PERIOD

 

1,195

 

1,928

 

-

CASH AT END OF PERIOD

$

14,797

  $

2,110

  $

14,797

The accompanying notes are an integral part of these consolidated financial statements.

6

**SANGUINE CORPORATION & SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Cash Flows (Continued)

(Unaudited)

 

For the Three Months Ended 

March 31,

 

From Inception of the Development Stage on January 18, 1990 through March 31

 

2011

 

2010

 

2011

SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES

 

 

 

 

 

 

CASH PAID FOR:

 

 

 

 

 

 

   Interest

$

-

  $

-

  $

-

   Income taxes

$

-

  $

800

  $

2,500

 

 

 

 

 

 

 

NON-CASH ACTIVITIES

 

 

 

 

 

 

  Common stock issued for debt conversion

$

-

  $ 

-

  $

9,600

  Contributed capital for interest contributed

$

3,324

  $

2,636

  $

21,464

  Interest on beneficial conversion feature

$

-

  $

-

  $

25,000

  Legal related to beneficial conversion feature

$

-

  $

-

  $

3,750

  Common stock issued for prepaid services

$

-

  $

-

  $

585,019

  Common stock issued for debt and accrued expenses

$

6,075

  $

-

  $

2,828,142

The accompanying notes are an integral part of these consolidated financial statements.

7

***SANGUINE CORPORATION & SUBSIDIARY***

(A Development Stage Company)

Notes to Consolidated Financial Statements

March 31, 2011 and December 31, 2010

NOTE 1 -

BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim financial statements be read in conjunction with the Company’s most recent audited financial statements and notes thereto included in its December 31, 2010 Annual Report on Form 10-K.  Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

NOTE 2 -

ORGANIZATION AND DESCRIPTION OF BUSINESS

Sanguine Corporation, (the “Company”) was incorporated January 27, 1974, in the State of Utah, using the name Sight and Sound Systems, Inc.  On July 8, 1974, the Company changed its name to International Health Resorts, Inc., and on June 25, 1993, the Company filed a Certificate of Amendment changing the name to Sanguine Corporation.  In May of 1992, the Company changed its domicile to the State of Nevada.

The Company is engaged in developing oxygen carriers to be used by the medical profession.  The Company is conducting research and development leading to F.D.A. clinical trials.

On June 14, 1993, the Company entered into an Agreement and Plan of Reorganization, wherein it was agreed that Sanguine Corporation (a Nevada Corporation) would issue 14,589,775 shares of its common stock to acquire 94% of the issued and outstanding shares of stock of Sanguine Corporation (a California Corporation).  During the year ended December 31, 2001, the Company acquired the remaining 6% of the California Corporation in exchange for the issuance of 840,195 shares of common stock.

From 1974 to 1980, 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.  The Company is a development stage company and these financial statements are presented as those of a development stage company effective January 18, 1990, coinciding with the incorporation date of Sanguine Corporation.

On March 7, 2008, the Company formed a wholly owned subsidiary called Sanguine Lifescience Corporation.  As part of the formation of Sanguine Lifescience Corporation, the Company transferred $15,000 to a bank account for Sanguine Lifescience use.  At this time, Sanguine Lifescience Corporation is not engaged in any business other than normal corporate matters.

8

***SANGUINE CORPORATION & SUBSIDIARY***

(A Development Stage Company)

Notes to Consolidated Financial Statements

March 31, 2011 and December 31, 2010

NOTE 3 -

GOING CONCERN

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital, it could be forced to cease operations.

The Company’s management has taken certain steps to maintain its operating and financial requirements in an effort to continue as a going concern until such time as revenues are sufficient to cover expenses.  Future plans include a debt or equity offering for between $1,000,000 - $1,500,000 which is estimated to enable the Company to complete the initial animal testing stage for FDA approval of its product.  However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

9

***SANGUINE CORPORATION & SUBSIDIARY***

(A Development Stage Company)

Notes to Consolidated Financial Statements

March 31, 2011 and December 31, 2010

NOTE 4 -

STOCK WARRANTS AND OPTIONS

The Company had no outstanding stock warrants during the three months ended March 31, 2011, and the year ended December 31, 2010.  During the three months ended March 31, 2011, the Company granted 3,000,000 options to purchase the Company’s common stock for an exercise price of $0.20 per share for a period of 60 months beginning in February 2011 and 2,362 options to purchase the Company’s common stock for an exercise price of $0.10 per share for a period of 35 months beginning in February 2011.  The options were granted as part of an employment agreement with Frank Marra entered into during the quarter.  The Company valued the options using the Black-Scholes option-pricing model with the following assumptions: dividend yield of zero percent; expected volatility of 176.85%; risk-free interest rate of 2.39%; and expected life of 5 years.   A summary of the status of the Company’s outstanding stock options as of March 31, 2011 and December 31, 2010 and changes during the periods then ended is presented below:

 

2011

 

2010

 

Shares

 

Weighted Average Exercise Price

 

Shares

 

Weighted Average Exercise Price

Outstanding, beginning of year

701,433

 

$

.10

 

701,433

 

$

.10

Granted

3,002,362

 

 

.20

 

-

 

 

-

Expired/Cancelled

-

 

 

-

 

-

 

 

-

Exercised

-

 

 

-

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

Outstanding end of year

3,703,795

 

$

.18

 

701,433

 

$

.10

 

 

 

 

 

 

 

 

 

 

Exercisable

3,703,795

 

$

.18

 

701,433

 

$

.10

 

 

Outstanding

 

Exercisable

Range of Exercise Prices

 

Number outstanding at March 31, 2011

 

Weighted Average Remaining Contractual Life

 

Number Exercisable at March 31,2011

$

.10-.20

 

3,703,795

 

4.44

 

3,703,795

 

 

 

3,703,795

 

 

 

3,703,795

NOTE 5 - 

NOTES PAYABLE

During 2010, the Company entered into a loan agreement with an investor.  The note carries an interest rate of 7% per annum.  The balance of this loan at March 31, 2011 and December 31, 2010, was $57,700 and $20,700, respectively, along with accrued interest of $1,303 and $649, respectively.  Subsequent to March 31, 2011, the Company obtained a letter of understanding from the investor waiving all payments and any requirements for the issuance of options until June 30, 2011.    

During 2009, the Company entered into loan agreements with investors for $9,000.  The notes carry an

interest rate of 7% and are due on demand.  Interest expense for the quarter ended March 31, 2011 was $158.  The balance on these notes at March 31, 2011 and December 31, 2010 was $9,000 and $9,000, respectively, along with accrued interest of $1,208 and $1,050 respectively.

 

10

***SANGUINE CORPORATION & SUBSIDIARY***

(A Development Stage Company)

Notes to Consolidated Financial Statements

March 31, 2011 and December 31, 2010

NOTE 6 - 

EQUITY TRANSACTIONS

During the three months ended March 31, 2010 the Company issued 22,500 shares of common stock for services rendered.  The shares were valued at $7,875.

During the quarter the Company executed an employment agreement with the President of the Company which provided 3,000,000 options to purchase the Company’s common stock for an exercise price of $0.20 per share for a 60 month period beginning in February 2011.  The options were valued using the Black-Scholes option pricing model, with the following assumptions: dividend yield of zero percent; expected volatility of 176.85%; risk-free interest rate of 2.39%; and expected life of 5 years.  The value of the options was $984,975 and was expensed in the current quarter.

NOTE 7 - 

RELATED PARTY TRANSACTION

Related party payables at March 31, 2011 and December 31, 2010 represent amounts owed to officers of the Company for consulting fees and reimbursement of expenses paid of $219,641 and $182,675, respectively.  Interest of 6% -15% was computed on the balance of the related party payable and recorded as $3,324 of additional paid in capital and $217 of accrued interest.

During the quarter, the Company executed an employment agreement with the President of the Company.  See discussion in Note 6 above.

NOTE 8 -    SUBSEQUENT EVENTS

Subsequent to March 31, 2011, the Company received $23,000 in proceeds from new notes payable and obtained a letter of understanding from an investor, delaying the payment date for an outstanding note. See discussion in Note 5.  The Company has evaluated subsequent events per the requirements of ASC Topic 855 and has determined that there are no additional reportable subsequent events.

11

**Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations**

**Special Note Regarding Forward-Looking Statements**

This periodic report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the Plan of Operations provided below, including information regarding the Company’s financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities, and the plans and objectives of management. The statements made as part of the Plan of Operations that are not historical facts are hereby identified as "forward-looking statements."

**Critical Accounting Policies and Estimates**

 

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.  The Company believes there have been no significant changes during the three month periods ended March 31, 2011 and 2010, to the items disclosed as significant accounting policies since the Company’s last audited financial statements for the year ended December 31, 2010.

The Company’s accounting policies are more fully described in Note 1 of the consolidated financial statements.  As discussed in Note 1, the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Actual results could differ from these estimates under different assumptions or conditions.  The Company believes that the following addresses the Company’s most critical accounting policies.

We recognize revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”).  Under SAB 104, revenue is recognized at the point of passage to the customer of title and risk of loss, when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured.  We recognize revenue as services are provided.  Revenues are reflected net of coupon discounts.

We account for income taxes in accordance with ASC Topic 740.  Under ASC Topic 740, deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.  A valuation allowance has currently been recorded to reduce our deferred tax asset to $0.  

**Plan of Operation.**

We have not commenced planned principal operations, but have made progress, in formulation and stability testing. We are moving forward with testing of our product and seeking industry partners to assist in defraying the costs of testing.  Additionally, we are looking to start selling some of our product for use in research by labs around the country.  These efforts will be dependent on additional financing.  We have had communications with several labs and are in the process of investigating potential material supply contracts with such labs.  These contracts will allow us to start receiving potential revenues which would then be applied to further development and testing of our proposed products.

12

**Patents**

Presently, we do not have any patents on our technology or processes.  Our prior patents have not been renewed and we are in the process of filing new patents on the new processes and formulas.  At this time, we cannot say if these applications will be successful.  Additionally, without additional funding, we will not be able to complete the patent process.

**Results of Operations**

The Company had no sales during the quarter ended March 31, 2011.  The Company continues to focus on the development of its products.  As such, the Company has not had substantial revenue in either the quarter ended March 31, 2011 or 2010.  We continue to focus on the research and development activities related to our PHER-O2 and are focusing more on its use in research labs around the world.

We realized a net loss of $1,096,470 for the quarter ended March 31, 2011, and a net loss of $51,370 for the quarter ended March 31, 2010.  Most of our expense related to non-cash expenses related to employment contracts with our management.  In the quarter ended March 31, 2011, we entered into a new employment contract with our president and under the Black-Scholes model we recorded an expense related to the options of $984,475.  Without this non-cash expense, our loss would have been $111,495 for the quarter ended March 31, 2011.  Since we have limited revenues, we have had to rely on stock sales and loans to fund our operations and continue to increase our payables since we do not have the funds to pay all of our expenses.

As we move more to selling products to labs around the country, our selling, general and administrative expenses have been increasing.  For the quarter ended March 31, 2011, our selling, general and administrative expenses were $42,087 compared to $7,245 for the same period in 2010.  We are hopeful these selling efforts are paying off and hope to be able to start shipping product to labs around the country in the upcoming quarters.

**Liquidity and Capital Resources**

As of March 31, 2011, we had $14,797 in cash and $550,242 in current liabilities. Our cash position is not sufficient to cover our accounts payable or other current liabilities with working capital at March 31, 2011, of negative $535,445. As such we will be dependent on our ability to raise additional debt or equity capital to be able to cover current liabilities.  Without additional equity or debt financing, it will be difficult for the Company to remain in business.  In January 2011, we entered into a loan agreement with Wharton Capital, a company affiliated with our president, to provide additional financing of $25,000 which increased the outstanding balance payable to Wharton to $45,700 as of that time.  Wharton subsequently has loaned the Company an additional $35,000 of which $12,000 was received prior to March 31, 2011, with the remaining $23,000 loaned to the Company subsequent to March 31, 2011.  We are trying to restructure the loan agreement with Wharton recognizing we cannot pay Wharton under the current terms of the loan agreement.  Wharton has provided a waiver of payments until June 30, 2011 in an effort to restructure the loan agreement.  Under the terms of the loan agreement, the Company is required to issue Wharton 200,000 stock options with an exercise price of $0.20 per option.  At this time, Wharton has waived the issuance of the option until June 30, 2011 to provide us with time to restructure the loan agreement.  Even with restructuring the Wharton loan agreement, we still need additional funding to remain in business and advance our business plan.   

**Off-balance sheet arrangements**

We had no off-balance sheet arrangements during the quarter ended March 31, 2011.

**Forward-looking Statements**

Our Company and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Annual Report and other filings with the Securities and Exchange Commission and in reports to our Company’s stockholders. Management believes that all statements that express 

13

expectations and projections with respect to future matters, as well as from developments beyond our Company’s control including changes in global economic conditions are forward-looking statements within the meaning of the Act. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance, however, that management’s expectations will necessarily come to pass. Factors that may affect forward- looking statements include a wide range of factors that could materially affect future developments and performance, including the following:

Changes in Company-wide strategies, which may result in changes in the types or mix of businesses in which our Company is involved or chooses to invest; changes in U.S., global or regional economic conditions, changes in U.S. and global financial and equity markets, including significant interest rate fluctuations, which may impede our Company’s access to, or increase the cost of, external financing for our operations and investments; increased competitive pressures, both domestically and internationally, legal and regulatory developments, such as regulatory actions affecting environmental activities, the imposition by foreign countries of trade restrictions and changes in international tax laws or currency controls; adverse weather conditions or natural disasters, such as hurricanes and earthquakes, labor disputes, which may lead to increased costs or disruption of operations.

This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk.**

NA-Small Reporting Company

**Item 4.  Controls and Procedures.**

**Evaluation of Disclosure Controls and Procedures**

Our management, with the participation of our President and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our President and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.  Management believes, however, that our controls do provide reasonable assurances.

 

**Management’s Report on Internal Control over Financial Reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. 

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. 

 

Our management, with the participation of the President and Principal Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of March 31, 2011.  Based on this evaluation, our management, 

14

with the participation of the President and Principal Financial Officer, concluded that, as of March 31, 2011, our internal control over financial reporting was ineffective in that it failed to timely book equity transactions.  We are working to resolve this issue and have added additional consultants to assist in reviewing all transactions to assure they are timely recorded.

**Changes in internal control over financial reporting**

There have been no changes in internal control over financial reporting.

**PART II - OTHER INFORMATION**

**ITEM 1.  Legal Proceedings**

 

None

**ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds**

**Recent Sales of Unregistered Securities**

No additional sales of unregistered securities occurred during the March 31, 2011 quarter.  Please see our annual report on Form 10K for the year ended December 31, 2010 for all sales during the prior two years.

**Use of Proceeds of Registered Securities**

None; not applicable.

**Purchases of Equity Securities by Us and Affiliated Purchasers**

During the three months ended March 31, 2011, we have not purchased any equity securities nor have any officers or directors of the Company.

**ITEM 3.  Defaults Upon Senior Securities**

We are not aware of any defaults upon senior securities.

**ITEM 4.  Removed and Reserved**

**ITEM 5.  Other Information.**

None

**ITEM 6.  Exhibits**

(a)

Exhibits.

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed.

Exhibit

Number               Description

Location

10.1

Loan Agreement – Wharton Capital, LC January 3, 2011

This Filing

31.1

302 Certification of CEO

This Filing

31.2

302 Certification of Principal Financial Officer

This Filing

32

906 Certification

This Filing

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sanguine Corporation

(Registrant)

Date: May 20, 2011

By: /s/ Frank Marra

Frank Marra

CEO and Chairman of the

Board of Directors

Date: May 20, 2011

By: /s/ Frank Marra

Frank Marra

Principal Financial Officer and Director

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