UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

**FORM 10-K**

(Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended       December 31, 2009

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number       000-24480

**Sanguine Corporation**

(Exact name of registrant as specified in charter)

Nevada                                        95-4347608

State or other jurisdiction of                 (I.R.S. Employer I.D. No.

incorporation or organization

101 East Green Street, #6 Pasadena, California  91105

(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number, including area code: (626) 405-0079

Securities registered pursuant to section 12(b) of the Act:

Title of each class                 Name of each exchange on which registered

None                                             N/A

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes [  ]

No   [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act

Yes [X]

No   [   ]

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 if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 

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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]

State the aggregate market value of the voting stock held by nonaffiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days:   The average between the bid and ask price as of June 30, 2009, the end of the Registrant second fiscal quarter was $0.18, giving the shares held by non-affiliates a market value of approximately $447,774.  There are approximately 2,487,632 shares of common voting stock of the Issuer beneficially owned by non-affiliates.

As of March 26, 2010, the Registrant had 6,682,072 shares of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., part I, part II, etc.) into which the document is incorporated:  (1) Any annual report to security holders; (2) Any proxy or other information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933:  

NONE

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**PART I**

**ITEM 1. BUSINESS**

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 financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management. Statements in this periodic report that are not historical facts are hereby identified as “forward-looking statements.”

Business Development.

     Developmental Information for the Year Ended December 31, 2006.

On February 16, 2006, we entered into an Agreement for Department of Energy Funded Technology Assistance with the Battelle Memorial Institute, Pacific Northwest National Laboratory, Office of Small Business Programs, pursuant to which Pacific Northwest Laboratories will assess the affinity of our proprietary product, PHER-O2, as an industrially useful carrier of hydrogen and carbon dioxide.

On October 18, 2006, our Board of Directors resolved to offer for sale in a private placement 353,333 shares of our common stock that are “restricted securities” to “accredited investors” at $1.20 per share for aggregate gross proceeds of $400,000.  This offering was closed on February 12, 2007, with 37,333 shares having been sold for gross proceeds of approximately $44,800.

     Developmental Information for the Year Ended December 31, 2007

Effective January, 2007 we extended the expiration dates of 97,156 outstanding warrants to purchase shares of our common stock at $1.60 per share to March, 2008, or a year from the date on which they were scheduled to expire.

On November 21, 2007, we executed a Consulting and Confidentiality Agreement for a 12 month term with KKS Venture Management, Inc. (“KKS”) and Alfonso C. Knoll (“Knoll”), its principal, whereby KKS was engaged to provide consulting services.   KKS agreed to exercise its best efforts to provide us with help in gaining market awareness and exploring the possibilities of a European listing; recommending a capitalization restructure to facilitate an offering of $5,000,000; and, in approaching a large underwriter to structure a secondary offering for the advertising of our brand and to increase our budget.  KKS also agreed to provide such managerial help and consultation to foster our growth and performance. The KKS Agreement automatically renews with the same terms on the last day of the 12th month, unless either party gives written notice of intent not to renew.

KKS and Knoll were compensated as follows:

· Upon approval of the KKS Agreement, we issued to KKS, one hundred fifty thousand (150,000) shares of our common stock that are “restricted securities” under Rule 144 of the Securities and Exchange Commission (the “SEC”), with “piggy-back” registration rights; and

· 33,750 shares of our common stock through a grant from our Stock Option Plan to Knoll, personally, under a separate Letter Agreement of even date; and

· After successful completion of a minimum of an initial $500,000 financing has been realized by us, we will pay KKS Twenty Thousand Dollars ($20,000) per month so long as we can afford to pay that sum while the KKS Agreement or any extension thereof is in effect. 

On November 21, 2007, we executed a Management Consulting Agreement for a 24 month term with LKB Partners, LLC (“LKB”), whereby LKB was engaged to provide additional management consulting services to us.  LKB had previously executed a Consulting Agreement with us on April 4, 2007.

LKB and its principal, Frank Marra, agreed to make themselves available to act in the full capacity as General Manager (Marra, individually) and President (Marra, individually) for us, which includes running all day to day business operations, entering into or negotiating contracts, hiring and firing of personnel, paying expenses, devising, revising and implementing business, financing, marketing strategies and all other necessary tasks relevant to the position.  Furthermore, KKS will be responsible for providing contacts for us to raise the requisite equity capital to pay our current 

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obligations and work to provide capital for our future endeavors. LKB will be paid $8,000 for each month of the 24 month term for these services.

We also agreed to pay LKB for these services 150,000 shares of our common stock that are “restricted securities,” of which 25,000 shares went to Marra personally under a separate Letter Agreement.  We also agreed to grant to LKB the option to purchase up to 9.5 percent of the issued and outstanding shares of our common stock at a price of $1.20 per share for a period of two years; provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 through the efforts of LKB or its associates or affiliates or by persons introduced by it or its associates or affiliates by March 31, 2008, with no proration of options in the event all $500,000 is not raised.

Effective during the quarter ended September 30, 2007, but approved by the Board of Directors on November 21, 2007, we executed a Stock Purchase Agreement with Terra Silex Holdings LLC, a Pennsylvania LLC (“Terra Silex”), wherebyTerra Silex purchased one hundred thousand (100,000) shares of our common stock for a purchase price of One Hundred Thousand Dollars ($100,000). This $100,000 amount counts against the $500,000 required to be raised as a condition of the LKB option referenced in the preceding paragraph.

Pursuant to a consulting agreement dated April 4, 2007, between us and LKB, LKB received 200,000 shares of our common stock that are “restricted securities,” and was granted an option to purchase an additional 250,000 shares of our common stock that are “restricted securities” at a price of $1.20 per share for a period of two years ending April 3, 2009.  On April 4, 2007, the Company also issued 50,000 shares to Frank Marra.

On November 20, 2007, Dr. Thomas C. Drees, our current President, executed an Option Agreement with LKB pursuant to which he granted LKB an option to purchase 500,000 shares of our common stock that are owned by him at a purchase price of $0.70 per share for a term of five (5) years, provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 through the efforts of LKB or its associates or affiliates or by persons introduced by LKB or its associates or affiliates by March 31, 2008.  The $100,000 invested by Terra Silex that is outlined above is considered to be a part of this $500,000 funding condition.

Also, on November 20, 2007, Dr. Drees executed an additional Option Agreement with Terra Silex pursuant to which he granted Terra Silex an option to purchase 500,000 shares of our common stock that are owned by him at a purchase price of $0.70 per share for a term of five (5) years, provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 by March 31, 2008, as outlined above.  The $100,000 invested by Terra Silex that is outlined above is also considered to be a part of this $500,000 funding condition.

On November 21, 2007, we executed a Management Consulting Agreement for a term in perpetuity with Thomas C. Drees, PhD., our current President, whereby Dr. Drees was engaged to provide management consulting services.  Dr. Drees has agreed to be retained to act in the full capacity as Chief Executive Officer for us, which includes, but not be limited to, working with management to help promote our overall growth, evaluating business opportunities, offering input on critical business issues that may arise from time to time, participate in planning for our business future and other like duties.  Dr. Drees will be paid $4,000 for each month, in perpetuity for these services, as long as we are in business or until Dr. Drees’ death.  In the event that Dr. Drees is relieved of the obligations of the Drees Agreement and no longer serves as CEO, the fee will remain intact until one of the aforementioned conditions occurs. Notwithstanding that the term shall not have been completed, we may terminate the Drees Agreement (i) upon the death of Dr. Drees, and (ii) if Dr. Drees should be incapacitated by illness or any other matter from performing his duties hereunder for a continuous period of sixty days.

Developments Information for 2008

In the first quarter of 2008, we raised $280,000 from two investors.  These funds will be used to further the development of our product and hire additional consultants to assist in our business development.  The Company also retained an investor relation firm which will be paid $20,000 and up to 25,000 shares of our common stock.  The term of the agreement is for one year.

Developments Information for 2009

In 2009, we focused on defining how our product could be used in combination with other companies’ products to bring it to a commercial state.  We also focused on how to pursue patent applications of our products. 

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Business.

We are engaged in the development of a synthetic red blood cell or an origination 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 25 times smaller than a red blood cell.  We believe that PHER-O2 can carry 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 at room temperature for up to three and one half years, much longer than human blood, which can only be stored at room temperature for about 42 days.

We have completed the compounding of PHER-O2, and we have completed initial gross animal tests that do not require regulatory approval prior to commencement.  However, regulatory agencies may review the data gathered from any of these tests.  We have manufactured the experimental doses of PHER-O2 required to conduct these tests.  Our current second phase of development of PHER-02 involves:

     *    the completion of a Master Drug File, pending final funding;

     *    the completion of a “method of use” to support labeling of the product;

     *    the completion of a 510 (k) submission to the FDA to request support for PHER-O2 as a device;

     *    the completion formulation adjustments as deemed necessary for PHER-O2’s use as a transport medium;

In parallel with our second phase of operations, we intend to continue working with outside agencies and/or universities to support the writing and completion of peer reviewed medical papers.  These papers will be announced as agreements with the agencies and/or universities are completed.  The Company has been contacted related to many uses of PHER-O2.  Notwithstanding internal Company identified programs, Sanguine is desirous of moving toward licensing opportunities.  To complete licensing opportunities, it will be necessary for third parties to complete necessary testing and peer reviewed studies.  Should the testing and studies prove successful, the Company intends to move toward revenue generation.  All revenue considerations will comply with all necessary FDA requirements.

In our third phase of operations, we intend to continue developing the perfluorocarbon compounds in PHER-O2 in order to optimize its quality for intravenous use; and begin animal safety and efficacy trials in accordance with FDA guidelines and comparable foreign regulatory requirements, with the aid and assistance of a regulatory specialist.  We will need additional funding for these purposes.

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; and

     *    complete overseas testing and begin overseas sales in foreign countries.

In our final phase, we also intend to continue trials to test PHER-O2 for other applications, transplant organ preservation and treatment of carbon monoxide poisoning, sickle cell anemia, heart attack and stroke and numerous other confidential areas.  We will have to conduct similar rigorous testing and clinical trials of PHER-O2 for each desired application, although we expect much of all sales will be off-label, as was the case with the first generation sales of Fluosol, a first generation product of PHER-O2.

PHER-O2 has not submitted any application to any federal, state or foreign agency to seek authority for animal or human testing.  The development process will be time consuming and expensive.  It will also be 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 except for licensing.  We cannot assure you that we will be able to raise the money 

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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 one lead product, PHER-O2, and 15 extensions of that product. Our success hinges largely on the success of this product.  We cannot 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 and was used in the FDA approved first generation product, Fluosol, purified water and a proprietary surfactant to hold the emulsion together. Perfluoro-decalin gives our product its oxygen carrying ability.  The surfactant is non-toxic and was FDA approved in Fluosol 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 B & C, Mad Cow and other blood-borne disease;

     *    universal match for all blood types;

     *    may be mass-produced;

     *    may have a three and one half year shelf life;

     *    may be stored at room temperature;

     *    has controllable circulatory half-life; and

     *    may be 1/25th the size of a red blood cell.

     PHER-O2 is a second generation improved drug from Fluosol-DA, the only synthetic red blood cell approved by the FDA.  This approval 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:

     *     transportation of pancreas islets for treatment of diabetes;

     *     ophthalmic retinal surgery;

     *     angioplasty;

     *     external oxygenation of infection, ischemic tissue and diabetic ulcers;

     *     Alzheimer's;

     *     oxygenation of cancerous tumors;

     *     nuclear magnetic resonance imaging;

     *     CAT scans;

     *     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.

Preliminary testing has indicated that the transportation of pancreas islet cells in a bath of PHER-02 in the treatment of diabetes has significantly increased the number of islet cells available for transplantation.

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For Ophthalmic retinal surgery, we are evaluating a new version of PHER-02 for surgical use.  This product is believed to have characteristics that can be used for retinal surgery because of its specific weight properties.  The new product will be transparent.

Blood transfusion represents a vast market for synthetic red blood cells.  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.  The present market for transfusions worldwide is 100,000,000 units per year, but that is only one-third of the annual demand. 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 know 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 know 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, emergency rooms and battle fields.

As HIV, hepatitis B & C 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 with its risk of AIDS, hepatitis and mad cow disease.

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 25 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 former competitors had obtained in 1989 FDA approval under Dr. Drees' management 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 announced in 1993 that it would no longer manufacture its product, leaving us well positioned in this market segment.  Fluosol was non-stable, so it had to be frozen, which made it difficult to handle.

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 mechanically to pump and oxygenate heart patients' blood.  This procedure is known as "cardioplegia."  Surgeons currently use saline, dextrose or hydroxyethyl 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, and makes PHER-O2 a diagnostic for these types of tumors.

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 the Products or Services.

None; our products are still in the research and development stage.

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Status of any Publicly Announced New Product or Service.

None; not applicable.

Competitive Business Conditions and the Small Business Issuer's Competitive Position in the Industry and Methods of Competition.

      10 years ago, there were 15 possible competitors.  We believe there are still three companies working to develop alternatives to human blood.  They include:

     *     Biopure Corporation of Cambridge, Massachusetts;

     *     Northfield Laboratories, Inc. of Evanston, Illinois (Northfield is currently engaged in FDA testing of its synthetic blood product, PolyHeme, that it believes is compatible with all human blood types and can be used in the treatment of all trauma victims [Associated Press, March 6, 2006]); and

     *     Synthetic Blood International, San Diego, California, (PFC).

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 outdated human blood and bovine 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 to compete successfully.

Sources and Availability of Raw Materials and Names of Principal Suppliers.

We plan to purchase highly purified medical-grade perfluorocarbons and surfactants from reliable vendors and to emulsify these ingredients in our own or other facilities, depending upon funding.  FluoroMed, LP, F2 Chemicals, Ltd. and KC America are qualified medical grade perfluorocarbon vendors. Surfactants are available through several U. S. vendors.  Because sterile 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, B. Braun Medical Inc., Fresenius Kabi, and Alliance Medical Products, Inc. are a few of the U. S. companies with the qualifications and capacity to perform this function.  However, we cannot 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.

Dependence on One or a Few Major Customers.

None; not applicable.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration.

Currently, we do not have any patents on our products.  Our prior patents have either expired or not been renewed.  We are in the process of resubmitting patent applications on our products and process but the ultimate success of these applications are unknown.

We have formulated certain proprietary GRAS surfactants during the course of our research and development activities.  The surfactant is mixed with the basic chemical of our product, perfluoro-decalin, to maintain the small particle size in the emulsion of PHER-O2 because the particle size of decalin alone in the blood stream may quickly increase in size and block arteries and veins.

Need for any Governmental Approval of Principal Products or Services.

The FDA and comparable foreign agencies require laboratory testing, animal and human 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" in Part I, Item 6.

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We cannot 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.

Effect of Existing or Probable Governmental Regulations on the Business.

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 lead product, PHER-O2, will require regulatory approval by appropriate governmental agencies before it can be commercialized.  Human 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.  Successful stability tests and some animal tests have 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 review 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 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 cannot 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.

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Research and Development Costs During the Last Two Fiscal Years.

Since inception, we have expended a total of approximately $1,973,158 on research and development.  During years ended December 31, 2009, and 2008, we had no research and development expense.

Cost and Effects 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.

Number of Total Employees and Number of Full Time Employees.

We presently have two employees, our Chairman, President and CEO, Thomas C. Drees, Ph.D.; and our Chief Financial Officer, David E. Nelson.  Dr. Drees is employed full time.  If we are able to commence initial FDA approved 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.

You may read and copy any materials that we file with the Securities and Exchange Commission at the Securities and Exchange Commission's public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  You may also find all of the reports that we have filed electronically with the Securities and Exchange Commission at their Internet site www.sec.gov.

**ITEM 2. PROPERTIES**

We lease approximately 600 square feet of office space located at 101 East Green Street, Suite 6, Pasadena California, 91105, at a base rent of $8,610 per month.  The lease expires in October 2010.

**ITEM 3. LEGAL PROCEEDINGS**

We are not a party to any pending legal proceeding.  To the knowledge of our 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.

**ITEM 4. (Reserved and Removed)**

**PART II**

**ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

Our common stock commenced to trade on the "OTC Bulletin Board" of the National Association of Securities Dealers, Inc. ("NASD") in the second quarter of 1994 under the symbol “SGNC,” and after September 10, 2008 under the symbol “SGUI.”

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----

The range of high and low bid quotations for our common stock during each quarter of the years ended December 31, 2007, 2008 and 2009, is presented below.  Prices are inter-dealer quotations as reported do not necessarily reflect transactions, retail markups, mark downs or commissions.  The prices prior to September 10, 2008, do not reflect the 1 for 20 reverse stock split.

                             STOCK QUOTATIONS*

Quarter ended:

High

Low

March 31, 2007

$.15

$.085

June 30, 2007

$.175

$.096

September 30, 2007

$.12

$.081

December 31, 2008

$.12

$.055

March 31, 2008

$.11

$.07

June 30, 2008

$.10

$.07

September 30, 2008**

$1.15

$.04

December 31, 2008**

$.75

$.17

March 31, 2009**

$.22

$.12

June 30, 2009**

$.25

$.11

September 30, 2009**

$.24

$.10

December 31, 2009**

$.25

$.14

        *    The future sale of presently outstanding “restricted securities” (common stock) by present members of our management and others may have an adverse effect on any market in the shares of our common stock.  See the heading “Recent Sales of Unregistered Securities,” directly below.

        **   In 2008, we completed a 1 for 20 reverse stock split.  Prices beginning with those at September 30, 2008, reflect the 1 for 20 reverse stock split.  All references to shares of common stock have been retroactively restated.

Holders.

The number of record holders of our common stock as of March 26, 2010, was approximately 562.

Dividends.

We have not declared any cash dividends on our common stock, and we do not intend to declare dividends in the foreseeable future.  Management intends to use all available funds for the development of our product, PHER-02 and related business opportunities.  There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock.

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----

Securities Authorized for Issuance under Equity Compensation Plans.

| Plan Category

Number of Securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)

 

(a)

(b)

(c)

Equity compensation plans approved by security holders

0

0

0

Equity compensation plans not approved by security holders

0

0

0

Total

0

0

0

Recent Sales of Unregistered Securities.

Restricted Securities.

The following "restricted securities" of our Company were sold during the past three calendar years:

Name

Number of Shares or Units

Date

Consideration

Thomas C. Drees

1,875

1/2007

Services

David E. Nelson

1,875

1/2007

Services

Edward L. Kunkel

1,875

1/2007

Services

Medical Advisory Board

5,625

1/2007

Services

Robert Kwun

1,875

1/2007

Services

James Shapiro        

7,500

1/2007

Services

Private Placement       

37,333

3/8/07

$1.20 per share

LKB Partners, LLC

200,000

4/4/2007

Services

KKS Venture Management, Inc.

150,000

11/21/2007

Services

LKB Partners, LLC

12,500

11/21/2007

Services

Terra Silex Holdings, LLC

100,000

11/21/2007

$100,000

Thomas C. Drees

2,500

4/2008

Services

David E. Nelson

2,500

4/2008

Services

Edward L. Kunkel

2,500

4/2008

Services

Medical Advisory Board

5,625

4/2008

Services

Thomas C. Drees

2,500

5/2009

Services

David E. Nelson

2,500

5/2009

Services

Edward L. Kunkel

2,500

5/2009

Services

Medical Advisory Board

10,000

5/2009

Services

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 were exempt from the registration requirements of the Securities Act, pursuant to Sections 4(2) and 4(6) thereof, and Rule 506 of Regulation D of the Securities and Exchange Commission and from various similar state exemptions.

During the year ended December 31, 2009 the Company received three subscriptions to purchase a total of 25,000 shares of preferred stock at $1 per share for total proceeds of $25,000.  As of year end, no shares have been issued.

During 2009, the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services.  Additionally, the 

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Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option.  The option would expire on December 31, 2013.   LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB.  The term of the consulting agreement is twenty-four months.

The Company also entered into a consulting agreement with Gary Corderman.  Under the terms of the agreement, Mr. Corderman received 500,000 shares of the Company’s common stock along with a monthly consulting fee of $4,000 if the Company has the funds to pay.  If the Company does not have the funds to pay Mr. Corderman, he will receive the $4,000 in shares of the Company.  The term of the agreement is for twelve months.  The Company also issued 17,500 shares for services in 2009.  All issuance were believed exempt from registration under Section 4(2) of the Securities Act of 1933.

Use of Proceeds of Registered Securities.

Proceeds from the sale of registered securities received during the year ended December 31, 2006, totaled $95,410, from warrant exercises. These funds were primarily used for professional services and administrative expenses. There were no sales of registered securities during 2008 or 2009.

Purchases of Equity Securities by Us and Affiliated Purchasers.

There were no purchases of our equity securities by us or any affiliated purchasers during the calendar year ended December 31, 2009.

**ITEM 6. SELECTED FINANCIAL DATA**

Summary of Financial Information

We had no revenues in 2008 or 2009.  We had a net loss of $388,622 for the year ended December 31, 2009.  At December 31, 2009, we had cash of $1,928.  We had a negative working capital of $309,466, which, if prepaid expenses are taken into account would increase to $477,167.

The following table shows selected summarized financial data for the Company at the dates and for the periods indicated. The data should be read in conjunction with the financial statements and notes included herein beginning on page F-1.

**STATEMENT OF OPERATIONS DATA**:

 

**For the Year Ended**

**December 31, 2009**

**For the Year Ended**

**December 31, 2008**

Revenues

$                         -

$                     -

Selling, General and Administrative Expenses

35,851

82,408

Net Loss

388,622

1,135,444

Basic Income (Loss) per Share

(0.06)

(0.22)

Diluted Income (Loss) per Share

(0.06)

(0.22)

Weighted Average Number of Shares Outstanding

6,070,914

5,089,200

Weighted Average Number of Fully Diluted Shares Outstanding

6,070,914

5,089,200

**BALANCE SHEET DATA**:

 

 

 

**December 31, 2009**

**December 31, 2008**

Total Current Assets

$            169,629

$        112,534

Total Assets

226,332

113,728

Total Current Liabilities

479,095

374,631

Working Capital

(309,466)

(262,097)

Stockholders’ Equity (Deficit)

(252,763)

(260,903)

**ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

Plan of Operation.

General.

We have not commenced planned principal operations, but have made progress, in formulation and stability testing.

In January, 2005, we were successful in developing improved formulations of our surfactants for PHER-02.

In December, 2006, we completed a pre-IND meeting with the FDA, where Company management presented data to determine an appropriate regulatory path related to PHER-O2.

Pending additional funding our plan of operation for the next 12 months is to complete the preparation and submission of the U.S. FDA New Device Application to support PHER-02 as a synthetic oxygen carrying product.

Our proposed plan of operation is composed of "stages," each of which coincides with a specific milestone in the process of developing PHER-O2. Each stage, and the projected cost of each, is as follows:

Stage A (approximately three-six months): Complete the development of perfluoro-decalin and the synthetic surfactants that make up PHER-O2, manufactured experimental doses in accordance with FDA and overseas regulations and submit data to support a Master Drug Filing.  Estimated cost is not to exceed $500,000, divided as follows: Completed surfactant formulation (done) and the manufacture of sufficient product for testing, (on going); animal safety and efficacy trials through a sub-contractor, (done); and administrative, patent and proprietary right protection and marketing costs,(in process) Optimize stabilized product to support the Master Drug Filing (in process).

Stage B (approximately three-six months): In the second period, we will produce optimal quantities and conduct testing in accordance with FDA and overseas requirements.  During the course of Stage A, we estimate that our increased technical, administrative, sales/marketing and manufacturing requirements will require us to the hire a few additional contractors and/or employees.

Stage C (approximately three-six months): In the third period, we intend to prepare new 510(k) device application with the FDA.  Estimated cost is $1,000,000, to be used as follows: set-up pilot facility, or subcontractor, to manufacture small quantities of PHER-O2 for use in testing and in connection with the New Drug Applications [done], prepare and submit data for use of PHER-O2 as a whole organ transportation medium in support of FDA labeling, and administrative, patent and proprietary right protection and marketing costs, (in process).

These cost estimates are based upon the prior experience of Thomas C. Drees, Ph.D., our President and CEO.  Dr. Drees has more than 33 years' experience in the blood industry with Abbott Scientific, Alpha Therapeutics and Sanguine Corporation. 

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 years ended December 31, 2009 and 2008, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

We had no revenues for the calendar years ending December 31, 2009, and 2008.  We had no material operations, except the research and development activities related to our subcontracted research and development of our product, PHER-O2.

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We realized a net loss of $388,622 for the year ended December 31, 2009, and a net loss of $1,135,444 for the year ended December 31, 2008.  Most of our expense related to the value of equity securities issued by us for services rendered.

We had no research and development expenses in 2008 or 2009.

Liquidity.

As of December 31, 2009, we had $1,928 in cash, with $479,095 in current liabilities.

During the calendar year ended December 31, 2009, we had operating expenses of $379,808, and no revenues.  We had operating expenses of $1,145,825 during the calendar year ended December 31, 2008.  Most of these expenses related to the value of equity securities issued by us for services rendered.

Cash resources at December 31, 2009, and 2008, were $1,928 and $1,159, respectively.   At this time without additional capital infusions, it will be difficult for the Company to remain in business.  Our auditors have issued a going concern qualification as to our ability to stay in business.  We currently do not have the resources to engage in any further development of our products and cannot cover ongoing expenses.  We are actively searching for industry partners to help offset further development costs.  However, even with industry partners, we must raise additional capital if we are to remain viable.

Off Balance Sheet Arrangements.

We had no off balance sheet arrangements during the year ended December 31, 2009.

Forward Looking Statements.

Statements made in this Form 10-K which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, and future performance of our business, including, without limitation, (i) our ability to gain a larger share of the synthetic blood industry, our ability to continue to develop products acceptable to the industry, our ability to retain relationships with suppliers and distributors, our ability to raise capital, and the growth of the synthetic blood industry, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in our reports on file with the Securities and Exchange Commission; general economic or industry conditions, nationally and/or in the communities in which we conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, changes in the synthetic blood industry, the development of products and that may be superior to the products and services offered by us, demand for synthetic blood products, competition, changes in the quality or composition of our products and services, our ability to develop new products and services, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our operations, products, services and prices.

Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

**ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

The financial statements of the Company are set forth immediately following the signature page to this Form 10-K.

**ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

The Company has had no disagreements with its certified public accountants with respect to accounting practices or procedures or financial disclosure.

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**ITEM 9A(T).  CONTROLS AND PROCEDURES**

**Evaluation of Disclosure Controls and Procedures**

Our management, with the participation of our President and CFO, 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 CFO 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 CFO, 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’s Annual 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 CFO, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2009.  In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework.  Based on this evaluation, our management, with the participation of the President and CFO, concluded that, as of December 31, 2009, our internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Security and Exchange Commission that permit the Company to provide only management’s report in this annual report.

**Changes in internal control over financial reporting**

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

**ITEM 9B.  OTHER INFORMATION**

None

**PART III**

**ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

Identification of Directors and Executive Officers.

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.

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Directors and Executive Officers.

Name

Positions Held or

Designation

Date of Election or Resignation

Date of Termination

Thomas C. Drees, PhD., MBA

CEO,

President,

Director

Chairman

6/93

1/98

6/93

11/95

*

*

*

*

David E. Nelson, CPA

Director

Chief Financial Officer

Secretary/Treasurer

3/96

3/96

6/03

*

*

*

Edward L. Kunkel, Esq.

Director

4/94

*

         *    These persons presently serve in the capacities indicated.

Term of Office.

The terms of office of the current directors shall continue until the annual meeting of stockholders, which has been scheduled by the Board of Directors to be held in June of each year. The annual meeting of the Board of Directors immediately follows the annual meeting of stockholders, at which executive officers for the coming year are elected.

Medical Advisory and Applications Board of Directors.

Name

Positions Held

Date of Election or Designation

Date of Termination or Resignation

Craig Morrison, M.D.

Member

10/00

*

Leon Cass Terry, M.D., Ph.D.

Member

10/00

*

Herbert J. Meiselman,      

Sc.D.

Member

10/00

*

Robert Kwun, M.D.           

Member

12/04

*

 *  These persons presently serve in the capacities indicated.

Business Experience.

Thomas C. Drees, Ph.D., MBA, Chairman, President, CEO and a Director. Dr. Drees, age 80, 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 33 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.

David E. Nelson, CPA, Chief Financial Officer and Director.  Mr. Nelson, age 65, 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 61 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 66 years of age, and practices at the Brigham Young Student Health 

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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.

Leon Cass Terry, M.D., Ph.D., Advisory Board Member, is 67 years of age, and joined the Medical College of Wisconsin as a Professor of Neurology and Professor of Physiology in 1989, until his retirement.  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 neurological disorders.

Herbert J. Meiselman, Sc.D., Advisory Board Member, is 68 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.

Robert Kwun, M.D., Advisory Board Member, is 43 years of age.  He graduated from Harvard University, and then received his medical degree from Columbia University, in New York.  His clinical training includes Columbia University's Manhattan Eye Ear and Throat Hospital, Los Angles Children's-USC Medical Center, the Doheny Eye Institute and New York's St. Vincent's Hospital.

Significant Employees.

There are no significant employees.

**LKB Partners, LLC**

The Company and LKB Partners, LLC entered into an agreement in November 2007 whereby LKB was engaged to provide management consulting services to the Company.  These services included handling the duties of general manager and president of the Company.  As part of this agreement, Frank Marra of LKB Partners, LLC agreed to handle the duties of president of the Company.  LKB Partners, LLC was founded in 2006 and engages in financial and business consulting.

Mr. Marra, age 46, is currently the managing member of LKB Partners, LLC which engages in financial consulting and acts as a private investment firm for small companies.  Prior to founding LKB in November 2006, Mr. Marra ran Stonebridge Ross which he founded in 1992 and sold in 2003.  Mr. Marra also worked as a registered representative for Drexel Burnham after attending college at the University of West Virginia.  Mr. Marra has focused on work with public and private emerging growth companies.  As part of Mr. Marra’s consulting work, he has acted as interim CEO for three public companies Sun Cut Floral Distributors from 1999 to 2001, a consolidator of national floral distributors, Interactive Medical Technologies from 1993 to 1995, a biomedical technology company and Rheologics, Inc. from 2005 to 2007 which developed a whole blood viscometer.

As part of the consulting agreement with LKB Partners, LLC and Frank Marra, the Company will pay LKB $8,000 for each month of the 24 month term for these services.  We also agreed to pay LKB for these services 150,000 shares (7,500 after giving effect for the 1 to 20 reverse split) of our common stock that are “restricted securities,” of which 

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25,000 shares went to Marra personally under a separate Letter Agreement.  We also agreed to grant to LKB the option to purchase up to 9.5 percent of the issued and outstanding shares of our common stock at a price of $1.20 per share for a period of two years; provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 through the efforts of LKB or its associates or affiliates or by persons introduced by it or its associates or affiliates by March 31, 2008, with no proration of options in the event all $500,000 is not raised.   The $500,000 was not met and this option expired.  We did not have the cash resources to meet all of our payment obligations under our consulting agreements. During 2009, we modified the agreements with LKB and Mr. Marra whereby the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services.  Additionally, the Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option.  The option would expire on December 31, 2013.   LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB.  The term of the consulting agreement is twenty-four months.

Pursuant to a consulting agreement dated April 4, 2007, between us and LKB, LKB received 200,000 (10,000 after giving effect to our 1 for 20 reverse stock split) shares of our common stock that are “restricted securities,” and was granted an option to purchase an additional 250,000 shares of our common stock that are “restricted securities” at a price of $1.20 per share for a period of two years ending April 3, 2009.  This option was not exercised.  On April 4, 2007, the Company also issued 50,000 shares (2,500 shares after giving effect to our 1 for 20 reverse stock split) to Frank Marra.

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)  Filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

          (2)  Was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

          (3)  Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his involvement in any type of business, securities or banking activities;

          (4)  Was found by a court of competent jurisdiction in a civil action, by the Securities and Exchange Commission  or the Commodity Futures Trading Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated.

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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 by our directors, executive officers or 5% stockholders:

Filer

Transaction 

Date Report Due

Date Report Filed

David E. Nelson, CPA

Director, CFO, Secretary/Treasurer

Disposal of 5,500 Shares

Acquisition of 1,250 Shares

Disposal of 12,331 Warrants

Acquisition of 1,250

Shares

Acquisition of 1,250

Shares

Acquisition of 1,875

Shares

10/27/04

4/13/05

1/05/05

10/7/05

5/4/06

1/17/07

4/18/05

4/18/05

4/18/05

3/28/08

3/28/08

3/28/08

Edward L. Kunkel, Esq.

Director

Acquisition of 1,250 shares

Acquisition of 1,875

Shares

Acquisition of 1,250

Shares

Acquisition of 1,250

Shares

Acquisition of 1,875

Shares

4/13/05

1/17/07

10/7/05

5/4/06

1/17/07

4/19/05

3/26/08

3/28/08

3/28/08

3/31/08

Thomas C. Drees, Ph.D.

Director and President

Acquisition of 1,250 Shares

Disposal of 10,250 Shares

Acquisition of 1,875

Shares

Acquisition of 1,250

Shares

Acquisition of 1,250

Shares

Acquisition of 1,875

Shares

4/13/05

12/22/04

1/17/07

10/7/05

5/4/06

1/17/07

4/19/05

4/19/05

3/26/08

3/28/08

3/28/08

3/31/08

In addition to the late reports by the above officers, through a series of consulting agreements and option contracts, a consulting firm and individuals acquired the ability to purchase over 10% of our outstanding common stock and acquired additional shares of our common stock that would make such parties greater than 10% shareholders.  This firm and/or individual have not made their filings including the form 3 filing required and the filings required under Section 13 of the Exchange Act.

Code of Ethics.

We have adopted a Code of Ethics which was attached as Exhibit 14 to our Annual Report on Form 10-K for the calendar year ended December 31, 2002. See Part III, Item 13.

Nominating Committee.

We have not established a Nominating Committee because we believe that our three member Board of Directors is able to effectively manage the issues normally considered by a Nominating Committee.

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If we do establish a Nominating Committee, we will disclose this change to our procedures by which shareholders may recommend nominees to our board of directors.

Audit Committee.

We do not have an Audit Committee separate from our Board of Directors because of our present limited operations.

**ITEM 11.  EXECUTIVE COMPENSATION**

SUMMARY COMPENSATION TABLE

The following tables set forth certain summary information concerning the compensation paid or accrued for each of the Company's last three completed fiscal years to the Company's or its principal subsidiaries= chief executive officer and each of its other executive officers that received compensation in excess of $100,000 during such period (as determined at December 31, 2008, the end of the Company's last completed fiscal year):

Name and Principal Position

(a)

Year

(b)

Salary

($)

(c)

Bonus

($)

(d)

Stock Awards

($)

(e)

Option Awards

($)

(f)

Non-Equity Incentive Plan Compensation

($)

(g)

Nonqualified  Deferred Compensation

($)

(h)

All Other Compensation

($)

(i)

Total

Earnings

($)

(j)

Thomas C. Drees, Ph.D., MBA, CEO, President, Chairman of the Board

12/31/09

12/31/08

12/31/07

*

*

*

0

0

0

*

*

*

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

David E. Nelson, CPA

CFO and Director

12/31/09

12/31/08

12/31/07

*

*

*

0

0

0

*

*

*

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Edward L. Kunkel, Esq.

Director

12/31/09

12/31/08

12/31/07

*

*

*

0

0

0

*

*

*

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

*   Commencing with the quarter ended December 31, 2004, members of our Board of Directors will be paid 625 shares of common stock per quarter for all services rendered to us in lieu of employment contracts.  See Part III, Items 12 and 13, below.

On November 21, 2007, we executed a Management Consulting Agreement for a term in perpetuity with Thomas C. Drees, PhD., our current President, whereby Dr. Drees was engaged to provide management consulting services.  Dr. Drees has agreed to be retained to act in the full capacity as Chief Executive Officer for us, which includes, but not be limited to, working with management to help promote our overall growth, evaluating business opportunities, offering input on critical business issues that may arise from time to time, participate in planning for our business future and other like duties.  Dr. Drees will be paid $4,000 for each month, in perpetuity for these services, as long as we are in business or until Dr. Drees’ death.  In the event that Dr. Drees is relieved of the obligations of the Drees Agreement and no longer serves as CEO, the fee will remain intact until one of the aforementioned conditions occurs. Notwithstanding that the term shall not have been completed, we may terminate the Drees Agreement (i) upon the death of Dr. Drees, and (ii) if Dr. Drees should be incapacitated by illness or any other matter from performing his duties hereunder for a continuous period of sixty days.  We have not had the funds to meet our ongoing obligations under this agreement.

During 2009, the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services.  Additionally, the 

-21-

Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option.  The option would expire on December 31, 2013.   LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB.  The term of the consulting agreement is twenty-four months.

The Company also entered into a consulting agreement with Gary Corderman.  Under the terms of the agreement, Mr. Corderman received 500,000 shares of the Company’s common stock along with a monthly consulting fee of $4,000 if the Company has the funds to pay.  If the Company does not have the funds to pay Mr. Corderman, he will receive the $4,000 in shares of the Company.  The term of the agreement is for twelve months.

Outstanding Equity Awards.

See the heading "Compensation of Directors" below.  Also, see the heading “Securities Authorized for Issuance Under Equity Compensation Plans” in Part II, Item 5, above.

Compensation of Directors.

All directors, executive officers and Medical Advisory Board Members will be paid 2,500 shares of our common stock per year, in quarterly issuances.

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, based on the agreements entered into in November 2007, between us and LKB, Terra Silex, and Dr. Drees and LKB, and Dr. Drees and Terra Silex, Terra Silex and LKB have accumulated the potential to acquire substantial numbers of our common stock.  Accordingly, these agreements may be deemed to involve a “change in control” of our Company, especially if all options are exercised.

Securities Authorized for Issuance under Equity Compensation Plans.

Equity Compensation Plan Information

Plan Category

Number of Securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)

 

(a)

(b)

(c)

Equity compensation plans approved by security holders

0

0

0

Equity compensation plans not approved by security holders

0

0

0

Total

0

0

0

-22-

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

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 March 26, 2010:

Security Ownership of Certain Beneficial Owners.

Name and Address

Number of Shares Beneficially Owned

 

Percent of Class (1)

Thomas C. Drees, Ph.D., MBA (2)

101 East Green Street, #11

Pasadena, California  91105

1,855,782

 

27.8%

 

 

 

 

LKB Partners, LLC

3502 Scotts Lane #1221

Philadelphia, PA 19129

1,876,433

 

28.1%

 

 

 

 

______________________

(1) Based upon 6,682,072 shares of outstanding common stock on March 26, 2010.

(2) Dr. Drees owns approximately 1,576,325 shares in his own name and 279,457 shares in the name of the Drees Family Trust which he is a co-trustee with his wife.

(3) LKB Partners, LLC is controlled by Frank Marra.  In addition to the 1,175,000 shares owed by LKB Partners, LLC, it has an option to acquire 9.5% of the Company’s common stock at an exercise price of $0.10 per share, which based on the number of shares presently outstanding would result in the issuance of another 701,433 shares to LKB Partners, LLC.

   

Security Ownership of Management.

Name and Address

Number of Shares Beneficially Owned

 

Percent of Class (1)

Thomas C. Drees, Ph.D., MBA

101 East Green Street, #11

Pasadena, California  91105

1,855,782

 

27.8%

 

 

 

 

David E. Nelson, CPA

528 14th Avenue

Salt Lake City, Utah  84103

83,341

 

1.2%

 

 

 

 

Edward L. Kunkel, Esq.

16 N. Marengo Ave, #517

Pasadena, California  91103

13,125

 

0.2%

 

 

 

 

All directors and officers as a group

(three persons)

1,952,248

 

29.2%

_____________________________

 (1)  Based upon 6,682,072 shares of outstanding common stock on March 26, 2010.

Indirect and Direct ownership are referenced by an "I" or "D", respectively.  All shares owned directly are owned beneficially and of record and such shareholder has sole voting, investment, and dispositive power, unless otherwise noted.

**ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE**

Transactions with Related Persons.

Related party payables, represents amounts owed to our officers for reimbursement of expenses paid on behalf of the 

-23-

Company.  For 2009 and 2008, related party payables were $122,428 and $38,461, respectively.

On November 21, 2007, we executed an agreement with Thomas C. Drees, PhD. for a term in perpetuity with Dr. Drees, PhD., our current President, whereby Dr. Drees was engaged to provide management consulting services.  Dr. Drees has agreed to be retained to act in the full capacity as Chief Executive Officer for us, which includes, but not be limited to, working with management to help promote our overall growth, evaluating business opportunities, offering input on critical business issues that may arise from time to time, participate in planning for our business future and other like duties.  Dr. Drees will be paid $4,000 for each month, in perpetuity for these services, as long as we are in business or until Dr. Drees’ death.  In the event that Dr. Drees is relieved of the obligations of the Drees Agreement and no longer serves as CEO, the fee will remain intact until one of the aforementioned conditions occurs. Notwithstanding that the term shall not have been completed, we may terminate the Drees Agreement (i) upon the death of Dr. Drees, and (ii) if Dr. Drees should be incapacitated by illness or any other matter from performing his duties hereunder for a continuous period of sixty days.

During 2009, the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services.  Additionally, the Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option.  The option would expire on December 31, 2013.   LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB.  The term of the consulting agreement is twenty-four months.

Except as indicated above, there have been no material transactions, series of similar transactions or currently proposed transactions, to which our Company 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.  As part of a series of contracts entered into in November 2007, several consulting firms were issued shares of our common stock.  For further information on the issuance of shares to the consulting firms and individuals see Business Development under Item 1-Descritption of Business herein.

Parents of the Issuer.

Except and to the extent that Dr. Drees may be deemed to be a parent of ours by virtue of his substantial stock ownership, we have no parents.

Transactions with Promoters and Control Persons.

Except as outlined above, there have been no material transactions, series of similar transactions or currently proposed transactions, to which our Company 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.

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

The following is a summary of the fees billed to us by our principal accountants during the calendar years ended December 31, 2009, and December 31, 2008:

**Fee Category**

**2009**

 

**2008**

Audit Fees

$

17,778

 

$

18,500

Audit-related Fees

 

0

 

 

0

Tax Fees

 

1,031

 

 

2,039

All Other Fees

 

0

 

 

0

Total Fees

$

18,809

 

$

20,539

Audit fees.  Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and the review of financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or  engagements.

Audit-related fees.  Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit fees."

-24-

Tax fees.  Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.

All other fees.  Consists of fees for products and services provided by our principal accountants, other than the services reported under "Audit fees," "Audit-related fees" and "Tax fees" above.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors.

We do not have an Audit Committee; therefore, there is no Audit Committee policy in this regard.  However, we do require approval in advance of the performance of professional services to be provided us by our principal accountant.  Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.

**ITEM 15. EXHIBITS**

Exhibit

Number               Description

3.1

Articles of Amendment increasing the authorized shares-Definitive Information Statement filed 

12/23/2005**

3.2

Amendment to the Articles of Incorporation reflecting 1 for 20 reverse stock split.**

3.3

Bylaws-8-K Current Report dated 11/28/2005**

14

Code of Ethics-Form 10KSB for the year ended December 31, 2002**

 

31.1

302 Certification of Thomas C. Drees, Ph.D.

31.2

302 Certification of David E. Nelson

32

906 Certification

          *    Summaries of all exhibits contained within this Report are modified in their entirety by reference to these Exhibits.

          **   These documents and related exhibits have been previously filed with the Securities and Exchange Commission and are incorporated herein by reference.

-25-

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to by signed on its behalf by the undersigned, thereunto duly authorized.

SANGUINE CORPORATION

                                    

By:  /s/ Thomas C. Drees

 Date: April 12, 2010

     Thomas C. Drees, Ph.D., MBA, CEO

By: /s/ David E. Nelson

 Date: April 12, 2010

      David E. Nelson, CPA, CFO  

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates stated.

Date: April 12, 2010

By:  /s/Thomas C. Drees

Thomas C. Drees, Ph.D., MBA

CEO, President and Chairman of the

Board of Directors

Date: April 12, 2010

By: /s/ David E. Nelson

David E. Nelson, CPA

CFO and Director

Date: April 12, 2010

By: /s/ Edward L. Kunkel

Edward L. Kunkel, Director

-26-

**SANGUINE CORPORATION AND SUBSIDIARY**

**(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2009 and 2008**

F-1

**C O N T E N T S**

Report of Independent Registered Public Accounting Firm

 F - 3

Consolidated Balance Sheets

 F - 4

Consolidated Statements of Operations

 F - 6

Consolidated Statements of Shareholders’ Equity (Deficit)

F - 7

Consolidated Statements of Cash Flows

 F - 14

Notes to the Consolidated Financial Statements

 F - 16

F-2

**Report of Independent Registered Public Accounting Firm**

To the Board of Directors

Sanguine Corporation and Subsidiary 

(A Development Stage Company)

Pasadena, California

We have audited the accompanying consolidated balance sheets of Sanguine Corporation and Subsidiary (A Development Stage Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2009, and for the period from inception of the development stage on January 18, 1990, through December 31, 2009.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sanguine Corporation and Subsidiary (A Development Stage Company) as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2009, and for the period from inception of the development stage on January 18, 1990, through December 31, 2009, in conformity with U.S. generally accepted accounting principles.

We were not engaged to examine management's assessment of the effectiveness of Sanguine Corporation's internal control over financial reporting as of December 31, 2009, included in the accompanying Form 10-K and, accordingly, we do not express an opinion thereon.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 7 to the financial statements, the Company has incurred significant recurring losses which have resulted in an accumulated deficit.  This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 7.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/HJ & Associates & Consultants, LLP

HJ Associates & Consultants, LLP

Salt Lake City, Utah

April 12, 2010

F-3

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Balance Sheets

ASSETS

 

December 31,

2009

 

December 31,

2008

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

Cash

$

1,928

$

1,159

Prepaid expenses

 

167,701

 

111,375

 

 

 

 

 

  Total Current Assets

 

169,629

 

112,534

 

 

 

 

 

PROPERTY AND EQUIPMENT, NET

 

716

 

1,194

 

 

 

 

 

OTHER ASSETS

 

 

 

 

Long term prepaid expenses

 

55,987

 

-

 

 

 

 

 

     TOTAL ASSETS

$

226,332

$

113,728

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

F-4

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Balance Sheets

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

December 31,

2009

 

December 31,

2008

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Accounts payable

$

344,316

$

319,851

Accrued interest

 

420

 

-

Related party payable

 

122,428

 

38,461

Notes payable

 

9,000

 

-

Accrued compensation

 

2,931

 

16,319

 

 

 

 

 

  Total Current Liabilities

 

479,095

 

374,631

 

 

 

 

 

     Total Liabilities

 

479,095

 

374,631

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Preferred stock, 10,000,000 shares authorized of $0.001 par value, no shares issued and outstanding, respectively

 

-

 

-

Common stock, 200,000,000 shares authorized of 

  $0.001 par value, 6,682,072 and 5,164,572 shares 

   issued and outstanding, respectively

 

6,682

 

5,165

Additional paid in capital

 

8,531,300

 

8,161,055

Preferred stock subscribed

 

25,000

 

-

Deficit accumulated during the development stage

 

(8,815,745)

 

(8,427,123)

 

 

 

 

 

   Total Shareholders’ Equity (Deficit)

 

(252,763)

 

(260,903)

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ 

  EQUITY (DEFICIT)

$

226,332

$

111,728

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

F-5

 

**SANGINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Operations

    

 

For the Year Ended 

December 31,

 

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

 

2009

 

2008

 

2009

REVENUES

$

-

$

-

$

191,762

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

  Professional fees

 

343,957

 

1,063,417

 

5,053,473

  Research and development

 

-

 

-

 

1,973,158

  Selling, general and administrative

 

35,851

 

82,408

 

2,820,528

 

 

 

 

 

 

 

     Total Operating Expenses

 

379,808

 

1,145,825

 

9,847,159

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

(379,808)

 

(1,145,825)

 

(9,655,397)

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

  Interest income

 

2

 

688

 

40,195

  Interest expense

 

(7,130)

 

(644)

 

(675,760)

  Loss on cash deposit

 

-

 

-

 

(10,020)

  Gain (loss) on foreign currency exchange

 

(1,686)

 

4,611

 

(17,396)

  Gain on settlement of debt

 

-

 

5,726

 

1,502,633

 

 

 

 

 

 

 

     Total Other Income (Expense)

 

(8,814)

 

10,381

 

839,652

 

 

 

 

 

 

 

NET LOSS

$

(388,622)

$

(1,135,444)

$

(8,815,745)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC LOSS PER SHARE

$

(0.06)

$

(0.22)

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING –BASIC

 

6,070,914

 

5,089,200

 

 

 

 

 

 

 

 

 

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

F-6

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit) 

 

Preferred Stock

Common Stock

 

Additional Paid-in Capital

 

Expenses Prepaid with Common Stock

 

Stock Subscribed

 

Deficit Accumulated During the Development Stage

 

Accumulated Other Compre-hensive Income

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance, January 18, 1990 Retroactive restated

-

$

-

 

71,418

$

71

$

2,424,571

$

-

$

-

$

(2,464,642)

$

-

Net income from January 1, 1990 through January 1, 1991

-

 

-

 

-

 

-

 

-

 

-

 

-

 

73,917

 

-

Balance, December 31, 1991

-

 

-

 

71,418

 

71

 

2,424,571

 

-

 

-

 

(2,390,725)

 

-

Common stock issued for services provided at  $0.001 per share

-

 

-

 

136

 

1

 

1

 

-

 

-

 

-

 

-

Contributed capital by officer

-

 

-

 

-

 

-

 

750

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 1992

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(77,011)

 

-

Balance, December 31, 1992

-

 

-

 

71,554

 

72

 

2,425,322

 

-

 

-

 

(2,467,736)

 

-

Common stock issued to acquire 94% of outstanding stock of Sanguine Corporation

-

 

-

 

729,489

 

729

 

13,861

 

-

 

-

 

(14,590)

 

-

Common stock for cash at $4.31 per share

-

 

-

 

25,500

 

25

 

109,975

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 1993

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(92,895)

 

-

Balance, December 31, 1993

-

 

-

 

826,543

 

826

 

2,549,158

 

-

 

-

 

(2,575,221)

 

-

Quasi-reorganization

-

 

-

 

-

 

-

 

(2,423,964)

 

-

 

-

 

2,423,964

 

-

Common stock for cash at $7.85 per share

-

 

-

 

9,550

 

10

 

74,990

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 1994

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(230,779)

 

-

Balance, December 31, 1994

-

 

-

 

836,093

 

836

 

200,184

 

-

 

-

 

(382,036)

 

-

Common stock issued for debt and payables at $2.13 per share

-

 

-

 

60,800

 

61

 

129,203

 

-

 

-

 

-

 

-

Common stock issued for services at $2.50 per share

-

 

-

 

81,250

 

81

 

203,044

 

-

 

-

 

-

 

-

Balance Forward

-

$

-

 

978,143

$

978

$

532,431

$

-

$

-

$

(382,036)

$

-

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

F-7

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit) 

 

Preferred Stock

Common Stock

Additional  Paid-in  Capital

 

Expenses Prepaid with Common Stock

 

Stock Subscribed

 

Deficit Accumulated During the Development Stage

 

Accumulated Other Comprehensive Income

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance Forward

-

$

-

 

978,143

$

978

$

532,431

$

-

$

-

$

(382,036)

$

-

Net loss for the year ended December 31, 1995

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(366,843)

 

-

Balance, December 31, 1995

-

 

-

 

978,143

 

978

 

532,431

 

-

 

-

 

(748,879)

 

-

Common stock issued for cash at $5.00 per share

-

 

-

 

500

 

1

 

2,499

 

-

 

-

 

-

 

-

Common stock issued for debt and payables at $4.97 per share

-

 

-

 

16,275

 

16

 

80,915

 

-

 

-

 

-

 

-

Common stock issued for services at $0.02 per share

-

 

-

 

48,968

 

49

 

930

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 1996

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(210,017)

 

-

Balance, December 31, 1996

-

 

-

 

1,043,886

 

1,044

 

616,775

 

-

 

-

 

(958,896)

 

-

Common stock issued for services at $1.87 per share

-

 

-

 

5,000

 

5

 

9,329

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 1997

-

 

-

 

-

 

-

 

-

 

-

-

 

(166,212)

 

-

Balance, December 31, 1997

-

 

-

 

1,048,886

 

1,049

 

626,104

 

-

 

-

 

(1,125,108)

 

-

Common stock issued for cash at $2.00 per share

-

 

-

 

60,900

 

61

 

122,139

 

-

 

-

 

-

 

-

Common stock issued for debt and payables at $4.33 per share

-

 

-

 

12,000

 

12

 

53,115

 

-

 

-

 

-

 

-

Common stock issued for services at $2.33 per share

-

 

-

 

33,725

 

34

 

78,593

 

-

 

-

 

-

 

-

Shares canceled

-

 

-

 

(5,000)

 

(5)

 

5

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 1998

-

 

-

 

-

 

-

 

-

 

-

-

 

(366,439)

 

-

Balance, December 31, 1998

-

$

-

 

1,150,511

$

1,151

$

879,956

$

-

$

-

$

(1,491,547)

$

-

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

F-8

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit) 

 

Preferred Stock

Common Stock

 

Additional Paid-in Capital

 

Expenses Prepaid with Common Stock

 

Stock Subscribed

 

Deficit  Accumulated  During the Development Stage

 

Accumulated Other Compre-hensive Income

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 1998

-

$

-

 

1,150,511

$

1,151

$

879,956

$

-

$

-

$

(1,491,547)

$

-

Common stock issued for cash at $3.60 per share

-

 

-

 

2,639

 

3

 

9,497

 

-

 

-

 

-

 

-

Common stock issued for services at $2.00 per share

-

 

-

 

5,000

 

5

 

9,995

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 1999

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(217,864)

 

-

Balance, December 31, 1999

-

 

-

 

1,158,150

 

1,159

 

899,448

 

-

 

-

 

(1,709,411)

 

-

Common stock issued for cash at $3.83 per share

-

 

-

 

165,913

 

166

 

635,154

 

-

 

-

 

-

 

-

Common stock issued for services at $5.26 per share

-

 

-

 

81,496

 

81

 

428,919

 

-

 

-

-

-

Net loss for the year ended December 31, 2000

-

 

-

 

-

 

-

 

-

-

-

 

(1,444,616)

 

-

Balance, December 31, 2000

-

 

-

 

1,405,559

 

1,406

 

1,963,521

 

-

 

-

 

(3,154,027)

 

-

Common stock issued for services at $5.00 per share

-

 

-

 

6,250

 

6

 

31,245

 

-

 

-

-

 

-

Common stock issued for services at $4.60 per share

-

 

-

 

3,750

4

 

17,246

 

-

 

-

 

-

 

-

Common stock issued for services at $2.52 per share

-

 

-

 

41,250

 

41

 

103,909

 

-

 

-

 

-

 

-

Common stock issued for services at $3.42 per share

-

 

-

 

2,500

 

3

 

8,547

 

-

 

-

 

-

 

-

Common stock issued for prepaid services at $4.60 per share

-

 

-

 

12,500

 

13

 

57,487

 

(57,500)

 

-

 

-

 

-

Common stock issued for commission of private placement of common stock

-

 

-

 

16,360

 

16

 

(16)

 

-

 

-

 

-

 

-

Balance Forward

-

$

-

 

1,488,169

$

1,489

$

2,181,939

$

(57,500)

$

-

$

(3,154,027)

$

-

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

F-9

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit) 

 

Preferred Stock

Common Stock

 

Additional Paid-in Capital

 

Expenses Prepaid with Common Stock

 

Stock Subscribed

 

Deficit Accumulated During the Development Stage

 

Accumulated Other Compre-hensive Income

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance Forward

-

$

-

 

1,488,169

$

1,489

$

2,181,939

$

(57,500)

$

-

$

(3,154,027)

$

-

Common stock issued for acquisition of subsidiary stock held by minority shareholders

-

 

-

 

42,010

 

42

 

(42)

 

-

 

-

 

-

 

-

Amortization of prepaid Expenses

-

 

-

 

-

 

-

 

-

 

43,125

 

-

 

-

 

-

Net loss for the year ended December 31, 2001

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1,037,570)

 

-

Balance, December 31, 2001

-

 

-

 

1,530,179

 

1,531

 

2,181,897

 

(14,375)

 

-

 

(4,191,597)

 

-

Additional common stock issued for acquisition of subsidiary stock held by minority shareholders in prior year

-

 

-

 

3,502

 

3

 

(3)

 

-

 

-

 

-

 

-

Common stock issued for services at $1.20 and $3.20 per share

-

 

-

 

80,750

 

81

 

58,656

 

-

 

-

 

-

 

-

Warrants issued for services

-

 

-

 

-

 

-

 

989,956

 

-

 

-

 

-

 

-

Common stock issued for prepaid services at $1.14 per share

-

 

-

 

85,000

 

85

 

96,425

 

(96,510)

 

-

 

-

 

-

Common stock issued for  Cash-less warrant exercise at $1.20 - $2.60 per share

-

 

-

 

25,000

 

25

 

103,600

 

-

 

-

 

-

 

-

Common stock issued for exercise of warrants for cash at $1.60 per share

-

 

-

 

15,500

 

16

 

24,784

 

-

 

-

 

-

 

-

Amortization of prepaid Expenses

-

 

-

 

-

 

-

 

-

 

14,375

 

-

 

-

 

-

Net loss for the year ended December 31, 2002

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1,729,701)

 

-

Balance, December 31, 2002

-

$

-

 

1,739,931

$

1,741

$

3,455,315

$

(96,510)

$

-

$

(5,921,298)

$

-

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

F-10

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit) 

 

Preferred Stock

Common Stock

 

Additional Paid-in Capital

 

Expenses Prepaid with Common Stock

 

Stock Subscribed

 

Deficit Accumulated During the Development Stage

 

Accumulated  Other  Compre-hensive Income

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance, December 31,

 2002

-

$

-

 

1,739,931

$

1,741

$

3,455,315

$

(96,510)

$

-

$

(5,921,298)

$

-

Common stock issued for  cash-less option exercise at $0.60 and $0.80 per share for services and prepaid services

-

 

-

 

31,250

 

31

 

23,969

 

(19,231)

 

-

 

-

 

-

Common stock issued for  services at $0.60 - $2.20  per share

-

 

-

 

7,500

 

7

 

9,181

 

-

 

-

 

-

 

-

Common stock issued for  debt at $0.60 and $0.40  per share

-

 

-

 

103,168

 

103

 

54,924

 

-

 

-

 

-

 

-

Common stock issued for  debt and prepaid expenses at $1.60 per   share

-

 

-

 

50,000

 

50

 

79,950

 

(62,943)

 

-

 

-

 

-

Amortization of prepaid   Expenses

-

 

-

 

-

 

-

 

-

 

115,741

 

-

 

-

 

-

Net loss for the year   ended December 31,2003

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(324,531)

 

-

Balance, December 31,  2003

-

 

-

 

1,931,849

 

1,932

 

3,623,339

 

(62,943)

 

-

 

(6,245,829)

 

-

Common stock issued for cash-less option exercise at $1.20 and $1.60 per share for services

-

 

-

 

176,433

 

176

 

249,545

 

-

 

-

 

-

 

-

Common stock issued for services at $5.20 per   share

-

 

-

 

7,500

 

8

 

38,992

 

62,943

 

-

 

-

 

-

Common stock issued for debt at $0.80 and $1.40 per share

-

 

-

 

1,665,125

 

1,665

 

1,351,062

 

-

 

-

 

-

 

-

Common stock issued for Cash at $1.60-$3.00 per share

-

 

-

 

162,057

 

162

 

329,128

 

-

 

-

 

-

 

-

Common stock issued for  Cash-less warrant  exercise at $0.001 per  share

-

 

-

 

4,181

 

4

 

(4)

 

-

 

-

 

-

 

-

Net income for the year   ended December 31, 2004   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

843,384

 

-

Balance, December 31, 2004

-

$

-

 

3,947,145

$

3,947

$

5,592,062

$

-

$

-

$

(5,402,445)

$

-

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

F-11

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit) 

 

Preferred Stock

Common Stock

 

Additional Paid-in Capital

 

Expenses Prepaid with Common Stock

 

Stock Subscribed

 

Deficit Accumulated During the Development Stage

 

Accumulated Other Compre-hensive Income

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2004

-

$

-

 

3,947,145

$

3,947

$

5,592,062

$

-

$

-

$

(5,402,445)

$

-

Common stock issued for  services at $2.20-$6.00   per share

-

 

-

 

20,625

 

21

 

81,105

 

-

 

-

 

-

 

-

Common stock issued for  Cash at $1.74 per share

-

 

-

 

59,663

 

60

 

104,000

 

-

 

-

 

-

 

-

Common stock issued for   Debt reduction at $1.20  per share

-

 

-

 

8,000

 

8

 

9,592

 

-

 

-

 

-

 

-

Net loss for the year  ended December 31,  2005

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(337,751)

 

-

Balance, December 31,   2005

-

 

-

 

4,035,433

 

4,036

 

5,786,759

 

-

 

-

 

(5,741,196)

 

-

Common stock issued for  services at $2.40-$5.00   per share

-

 

-

 

36,250

 

36

 

143,776

 

-

 

-

 

-

 

-

Common stock issued for Cash at $1.60 per share

-

 

-

 

12,500

 

13

 

19,988

 

-

 

-

 

-

 

-

Common stock  Subscribed

-

 

-

 

-

 

-

 

-

 

-

 

27,800

 

-

 

-

Contributed capital for  Contributed interest on  Notes payable

-

 

-

 

-

 

-

 

520

 

-

 

-

 

-

 

-

Loss on Foreign  Currency Exchange

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(2,570)

Net loss for the year   ended December 31,  2006

-

 

-

 

-

 

-

-

 

-

 

-

 

(617,335)

 

-

Balance, December  31, 2006

-

 

-

 

4,084,183

 

4,085

 

5,951,043

 

-

 

27,800

 

(6,357,531)

 

(2,570)

Common stock issued for  services at $1.80-$4.60   per share

-

 

-

 

20,625

 

21

 

61,166

 

-

 

-

 

-

 

-

Common stock issued for Cash at $1.20 per share

-

 

-

 

37,333

 

37

 

44,763

 

-

 

(27,800)

 

-

 

-

Common stock issued for Cash at $1.60 per share

-

 

-

 

62,500

 

63

 

99,937

 

-

 

-

 

-

 

-

Common stock issued for services per consulting agreement at $2.40 per share

-

 

-

 

250,000

 

250

 

599,750

 

-

 

-

 

-

 

-

Common stock issued for services per consulting agreement at $1.62 per share

-

 

-

 

333,750

 

333

 

540,342

 

-

 

-

 

-

 

-

Balance Forward

-

$

-

 

4,788,391

$

4,789

$

7,297,001

$

-

$

-

$

(6,357,531)

$

(2,570)

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

F-12

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit) 

 

Preferred Stock

Common Stock

 

Additional Paid-in Capital

 

Expenses Prepaid with Common Stock

 

Stock Subscribed

 

Deficit Accumulated During the Development Stage

 

Accumulated Other Compre-hensive Income

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Forward

-

$

-

 

4,788,391

$

4,789

$

7,297,001

$

-

$

-

$

(6,357,531)

$

(2,570)

Common stock issued for  Cash at $1.00 per share

-

 

-

 

100,000

 

100

 

99,900

 

-

 

-

 

-

 

-

Contributed capital for options granted

-

 

-

 

-

 

-

 

380,605

 

-

 

-

 

-

 

-

Warrants extension

-

 

-

 

-

 

-

 

34,493

 

-

 

-

 

-

 

-

Adjustment to Unrealized   Loss on Foreign    Currency Exchange

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,570

Net loss for the year   ended December 31, 2007

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(934,148)

 

-

Balance, December  31, 2007

-

 

-

 

4,888,391

$

4,889

$

7,811,999

$

-

$

-

$

(7,291,679)

$

-

Common stock issued for services per consulting agreement at $1.20-$2.50 per share

-

 

-

 

17,500

 

17

 

33,671

 

-

 

-

 

-

 

-

Common stock issued for   services at $1.40 per share

-

 

-

 

25,000

 

25

 

34,975

 

-

 

-

 

-

 

-

Common stock issued for  Cash at $1.20 per share

-

 

-

 

233,681

 

234

 

279,766

 

-

 

-

 

-

 

-

Contributed interest on   Related party payables

-

 

-

 

-

 

-

 

644

 

-

 

-

 

-

 

-

Net loss for the year ended December 31, 2008

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1,135,444)

 

-

Balance, December 31, 2008

-

 

-

 

5,164,572

 

5,165

 

8,161,055

 

-

 

-

 

(8,427,123)

 

-

Common stock issued for  services at $0.18-$1.40   per share

-

 

-

 

17,500

 

17

 

16,300

 

-

 

-

 

-

 

-

Contributed interest on  Related party payables

-

 

-

 

-

 

-

 

6,709

 

-

 

-

 

-

 

-

Common stock issued for services per consulting agreement at $0.16- $0.17 per share

-

 

-

 

1,500,000

1,500

 

238,500

 

-

 

-

 

-

 

-

Stock options issued

-

 

-

 

-

 

-

 

108,736

 

-

 

-

 

-

 

-

Preferred stock subscribed

-

 

-

 

-

 

-

 

-

 

-

 

25,000

 

-

 

-

Net loss for the year   ended December 31, 2009

-

 

-

 

-

 

-

 

-

 

-

 

-

 

388,622

 

-

Balance, December 31, 2009

-

$

   -

 

6,682,072

$

6,682

$

8,531,300

$

-

$

25,000

$

(8,815,745)

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

F-13

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

 Consolidated Statements of Cash Flows

 

For the Year Ended 

December 31,

 

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

 

2009

 

2008

 

2009

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

$

(388,622)

$

(1,135,444)

$

(8,815,745)

Adjustments to reconcile net loss to net cash used

 by operating activities:

 

 

 

 

 

 

  Depreciation

 

477

 

373

 

6,280

  Common stock issued for services

 

-

 

35,000

 

3,365,446

  Contributed capital

 

6,709

 

645

 

7,874

  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

 

-

 

(5,726)

 

(104,552)

  Gain on conversions of debt to equity

 

-

 

-

 

(1,398,081)

Recognition of prepaid expenses and

  

  expenses prepaid with common stock

 

-

 

-

 

456,184

 Warrant extension

 

-

 

-

 

34,493

  Gain/Loss on foreign currency exchange

 

1,686

 

(4,611)

 

17,396

Changes in assets and liabilities:

 

 

 

 

 

 

  (Increase) decrease in prepaid expense

 

236,422

 

770,384

 

975,030

  Increase (decrease) in accounts payable

 

106,746

 

(2,531)

 

744,801

  Increase in accrued interest payable

 

420

 

-

 

547,699

  Increase in accrued liabilities

 

-

 

-

 

10,125

  Increase in customer deposits`

 

-

 

-

 

45,000

  Increase in accrued salaries

 

2,931

 

40,067

 

977,998

      Net Cash Used by Operating Activities

 

(33,231)

 

(301,843)

 

(2,364,702)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Cash paid for fixed assets

 

-

 

(895)

 

(6,995)

      Net Cash Used by Investing Activities

 

-

 

(895)

 

(6,995)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

  Proceeds from warrant conversion

 

-

 

-

 

524,700

  Proceeds from notes payable and notes payable- 

  related party

 

9,000

 

8,461

 

231,600

  Payments on notes payable and notes payable – 

  related party

 

-

 

-

 

(15,400)

  Proceeds from issuance of convertible debentures

 

-

 

-

 

40,000

  Preferred stock subscription

 

25,000

 

-

 

25,000

  Contributed capital

 

-

 

-

 

750

  Common stock issued for cash

 

-

 

280,000

 

1,566,975

Net Cash Provided by Financing Activities

 

34,000

 

288,461

 

2,373,625

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

769

 

(14,277)

 

1,928

CASH AT BEGINNING OF PERIOD

 

1,159

 

15,436

 

-

CASH AT END OF PERIOD

$

1,928

$

1,159

$

1,928

F-14

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Consolidated Statements of Cash Flows (Continued)

 

For the Year Ended 

December 31,

 

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

 

2009

 

2008

 

2009

SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES

 

 

 

 

 

 

CASH PAID FOR:

 

 

 

 

 

 

    Interest

$

-

$

-

$

-

    Income taxes

$

1,700

$

-

$

1,700

 

 

 

 

 

 

 

NON-CASH ACTIVITIES

 

 

 

 

 

 

  Common stock issued for debt conversion

$

-

$

-

$

9,600

  Equity instruments issued for services rendered 

$

16,319

$

33,688

$

3,236,641

  Contributed capital for interest contributed

$

6,709

$

645

$

7,874

  Interest on beneficial conversion feature

$

-

$

-

$

25,000

  Legal related to beneficial conversion feature

$

-

$

-

$

3,750

  Notes payable issued for services

$

-

$

-

$

727,950

  Common stock issued for prepaid services

$

348,735

$

-

$

585,019

  Common stock issued for debt

$

-

$

-

$

2,822,067

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

F-15

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.  Organization

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.

b.  Accounting Method

The Company’s consolidated financial statements are prepared using the accrual method of accounting.  The Company has elected a December 31 year-end.

c.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries.  All material intercompany accounts and transactions are eliminated in consolidation.

d.

Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share is computed by dividing net income (loss) attributable to common shares for the period by the weighted average number of common and potential common shares outstanding during the period. Potential common shares, composed of incremental common shares issuable upon the exercise of stock options and warrants, are included in the calculation of diluted net loss per share to the extent such shares are dilutive.  

F-16

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

d.  Basic Loss Per Share (continued)

The following table sets forth the computation of basic loss per share for the periods indicated:

 

For the Years Ended

December 31,

 

 

2009

 

2008

Loss (numerator)

$

(388,622)

$

(1,135,444)

Shares (denominator)

 

6,070,914

 

5,089,200

Net loss per common share – basic and diluted

$

(.06)

$

(.22)

 

 

 

 

 

The Company’s outstanding stock options have been excluded from the 2009 basic net loss per share calculation as they are anti-dilutive.  

e.  Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

f.  Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

F-17

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f.  Income Taxes (Continued)

Net deferred tax liabilities asset consists of the following components as of December 31, 2009 and 2008:

 

2009

 

2008

Deferred tax assets:

 

 

 

 

 

 

 

 

 

 

 

    Research and Development

$

81,645

 

$

81,645

    NOL Carryover

 

857,302

 

 

748,530

    Accrued Salaries

 

1,143

 

 

6,400

 

 

940,090

 

 

836,575

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

 

 

 

    Depreciation

 

(162)

 

 

(100)

 

 

 

 

 

 

    Valuation allowance

 

(939,928)

 

 

(836,475)

    Net deferred tax asset

$

-

 

$

-

 

 

 

 

 

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2009 and 2008 due to the following:

 

2009

 

2008

 

 

 

 

 

 

Book Income

$

(151,563)

 

$

(442,200)

Depreciation

 

(663)

 

 

32

Stock for Services/Options Expense

 

98,569

 

 

378,463

Currency valuation

 

658

 

 

1,798

Meals and Entertainment

 

713

 

 

2,105

Accrued compensation

 

(5,221)

 

 

(9,210)

Other

 

2,939

 

 

-

Change in valuation allowance

 

54,568

 

 

69,012

 

$

-

 

$

-

At December 31, 2009, the Company had net operating loss carryforwards of approximately $2,200,000 that may be offset against future taxable income from the year 2010 through 2029.  No tax benefit has been reported in the December 31, 2009 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

F-18

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f.  Income Taxes (Continued)

The Company files income tax returns in the U.S. federal jurisdiction, and**the states of California and Nevada.  With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2006.

 

The company had an outstanding tax liability to the state of California for the years ended 2003, 2004, 2005, and 2006.  The amount of the liability was $9,864 and was paid during 2008.

 

Included in the balance at December 31, 2009 and 2008, are no**tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.  Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

 

g.  Development Stage

The Company is considered a development stage Company.  The Company is devoting substantially all of its efforts to research and development and obtaining financing.  Principal operations have not commenced and no significant revenues have been derived from operations since inception.  The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.  

h.  Property and Equipment

Property and equipment are stated at cost.  Expenditures for small tools, ordinary maintenance and repairs are charged to operations as incurred.  Major additions and improvements are capitalized. Depreciation is computed using the straight-line method over estimated useful lives, which range between 3 to 5 years.  Fixed assets and related accumulated depreciation are as follows:

 

December 31

2009

 

December 31

2008

Furniture and fixtures

$

2,386

$

2,386

 

 

 

 

 

Accumulated depreciation

 

(1,670)

 

(1,192)

 

 

 

 

 

     Total Fixed Assets

$

716

 

1,194

Depreciation expense for the years ended December 31, 2009 and 2008, amounted to $477 and $373, 

respectively.

F-19

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

i. Revenue Recognition

Revenue is recognized when the sales amount is determined, shipment of goods to the customer has occurred and collection is reasonably assured.

j.

Newly Adopted Accounting Pronouncements

New accounting pronouncements that have a current or future potential impact on our financial statements are as follows: 

In June 2009, the FASB issued guidance under Accounting Standards Codification (“ASC”) Topic 105, “Generally Accepted Accounting Principles” (SFAS No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles). This guidance establishes the FASB ASC as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS 168 and the ASC are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The ASC supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the ASC has become non-authoritative. Following SFAS 168, the FASB will no longer issue new standards in the form of Statements, FSPs, or EITF Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to update the ASC, provide background information about the guidance, and provide the basis for conclusions on the change(s) in the ASC. We adopted ASC 105 effective for our financial statements issued as of September 30, 2009. The adoption of this guidance did not have an impact on our financial statements but will alter the references to accounting literature within the consolidated financial statements. 

In May 2009, the Financial Accounting Standards Board issued ASC Topic 855 “Subsequent Events”, to incorporate the accounting and disclosure requirements for subsequent events into U.S. generally accepted accounting principles with a required adoption date of June 30, 2009. ASC Topic 855 introduces new terminology, defines a date through which management must evaluate subsequent events, and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the balance sheet date. We adopted ASC Topic 855 as of the required effective date. 

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.

F-20

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

  k.  Equity Securities

Equity securities issued for services rendered have been accounted for at the fair market value of the securities on the date of issuance.

l. Stock Options

The Company measures and records compensation cost relative to employee stock option costs at fair market value based on the fair value of the equity or liability instruments issued.

m.  Valuation of Options and Warrants

The valuation of options and warrants granted to unrelated parties for services are measured as of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date the counterparty’s performance is complete.  Options and warrants are revalued in situations where they are granted prior to the completion of the performance.

n.  Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.  From time to time the Company carries cash balances at a single financial institution in excess of the federally insured maximum of $250,000

NOTE 2 -

RELATED PARTY TRANSACTIONS

Related party payables at December 31, 2009 and 2008 represents amounts owed to officers of the Company for consulting fees and reimbursement of expenses paid of $122,428 and $38,461, respectively.   Interest of 6% and 15% was computed on the balance of the related party payable and recorded as additional paid in capital.

NOTE 3 -

COMMITMENTS AND CONTINGENCIES

During February 1994, the Company entered into a lease for office space in Pasadena, California.  The lease has been extended through October 2010 with monthly rent payments of $861 with annual increases.

F-21

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 3 -

COMMITMENTS AND CONTINGENCIES (continued)

Future minimum lease payments under this non-cancelable operating lease are $8,610 through October 2010. 

Rent expense was $10,641 and $14,550 for the years ended December 31, 2009 and 2008, respectively.

Employment Agreements

Beginning the quarter ended September 30, 2004, the CEO, CFO and Vice President are each entitled to receive 625 shares of common stock of the company which are considered to be restricted securities. Such compensation is to be paid quarterly.  As of December 31, 2009 and 2008, a total of $2,931 and $16,319 in salaries has been accrued, respectively.  

NOTE 4 -

EQUITY TRANSACTIONS

During the year ended December 31, 2009 the Company received three subscriptions to purchase a total of 25,000 shares of preferred stock at $1 per share for total proceeds of $25,000.  As of year end, no shares have been issued.

During 2009, the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services.  Additionally, the Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option.  The option would expire on December 31, 2013.   LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB.  The term of the consulting agreement is twenty-four months.

The Company also entered into a consulting agreement with Gary Corderman.  Under the terms of the agreement, Mr. Corderman received 500,000 shares of the Company’s common stock along with a monthly consulting fee of $4,000 if the Company has the funds to pay.  If the Company does not have the funds to pay Mr. Corderman, he will receive the $4,000 in shares of the Company.  The term of the agreement is for twelve months.

 

During the year ended December 31, 2008 the Company completed a one for twenty reverse split of its issued and outstanding shares of common stock.  The financial statements have been adjusted to give retroactive recognition of this reverse split.  The Company also approved the addition of 10,000,000 shares of preferred stock.  No shares of preferred stock have been issued.  The Company in 2009, authorized a class of preferred stock entitled 2009 Series A Convertible Preferred Stock with 250,000 shares of preferred stock reserved for issuance under such series.  The Series A Convertible Preferred Stock converts into shares of common stock at the rate of 6 2/3 shares of common stock for every one share of preferred stock held.  The Series A Convertible Preferred Stock has no voting or dividend preferences.  

Also during the year ended December 31, 2008, the Company issued 4,666,667 shares of common stock valued at $280,000.  The Company retained an investor relation firm which was paid $20,000 and issued 500,000 shares of our common stock valued at $35,000.  The term of the agreement is for one year.  The Company also issued 350,000 shares in payment of previously accrued compensation valued at $33,678.

Common stock issued for services, prepaid services and cash-less option exercises have been accounted for at the fair market value of the securities on the date of issue.

F-22

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 5 -

STOCK OPTIONS AND WARRANTS

A summary of the status of the Company’s outstanding stock warrants as of December 31, 2009 and 2008 and changes during the years then ended is presented below:

 

2009

 

2008

 

Shares

 

Weighted Average Exercise Price

 

Shares

 

Weighted Average Exercise Price

Outstanding, beginning of year

-

 

$

-

 

36,157

 

$

1.60

Granted

-

 

 

-

 

-

 

 

-

Expired/Cancelled

-

 

 

-

 

(36,157)

 

 

(1.60)

Exercised

-

 

 

-

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

Outstanding end of year

-

 

$

-

 

-

 

$

-

 

 

 

 

 

 

 

 

 

 

Exercisable

-

 

$

-

 

-

 

$

-

In May 2009, we issued 1,000,000 shares to LKB Partners, LLC for consulting services.  Additionally, the Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option resulting in 701,433 shares.  The option would expire on December 31, 2013.   LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB.  The term of the consulting agreement is twenty-four months.

A summary of the status of the Company’s outstanding stock options as of December 31, 2009 and December 31, 2008 and changes during the periods then ended is presented below:

 

2009

 

2008

 

Shares

 

Weighted Average Exercise Price

 

Shares

 

Weighted Average Exercise Price

Outstanding, beginning of year

250,000

 

$

1.20

 

250,000

 

$

1.20

Granted

701,433

 

 

0.10

 

-

 

 

-

Expired/Cancelled

(250,000)

 

 

1.20

 

-

 

 

-

Exercised

-

 

 

-

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

Outstanding end of year

701,433

 

$

0.10

 

250,000

 

$

1.20

 

 

 

 

 

 

 

 

 

 

Exercisable

701,433

 

$

0.10

 

250,000

 

$

1.20

F-23

**SANGUINE CORPORATION AND SUBSIDIARY**

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 5 -

STOCK OPTIONS AND WARRANTS (continued)

 

 

Outstanding

 

Exercisable

Range of Exercise Prices

 

Number outstanding at December 31, 2009

 

Weighted Average Remaining Contractual Life

 

Number Exercisable at December 31, 2009

$

0.00-0.10

 

701,433

 

4

 

701,433

 

 

 

701,433

 

 

 

701,433

NOTE 7 -

GOING CONCERN

The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has historically incurred significant losses, which have resulted in an accumulated deficit of $8,815,745 at December 31, 2009 which raises substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.  The Company’s management has taken certain steps to maintain its operating and financial requirements in an effort to enable the Company to continue as a going concern until such time that revenues are sufficient to cover expenses, including:

The Company’s management has taken certain steps to maintain its operating and financial requirements in an effort to continue as a going concern until such time as revenues are sufficient to cover expenses. Future plans include a debt or equity offering for between $1,000,000 - $1,500,000 that should enable the Company to complete the testing stage for FDA approval of its product.  However, management cannot provide any assurances 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 plan described above, and eventually 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.

NOTE 8 - 

SUBSEQUENT EVENTS

Subsequent to year end, we issued 25,000 shares of our preferred stock in fulfillment of subscriptions received prior to December 31, 2009.  The sale was for total proceeds of $25,000.  The shares were sold to three investors.  The preferred stock is convertible into 6 2/3 shares of common stock per preferred share. As such the preferred stock is convertible into approximately 166,667 shares of common stock.

F-24 |
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