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.
Through the operations of our subsidiary, SGN LifeSciences we are dedicated to discovering, developing and commercializing novel biotechnologies that demonstrate significant potential for medical breakthroughs. The company is keenly focused on the development and commercialization of perfluorocarbon based therapeutic oxygen carriers. Its lead product, PHER-02, is an intravenous perfluorocarbon emulsion that is highly efficient at dissolving and delivering oxygen to the tissues. We believe that such properties will make PHER-02 an ideal product for the treatment of a myriad of medical conditions with high morbidity and/or mortality directly resulting from a lack of oxygen at the cellular level. Our philosophy is to develop products that have a sound scientific basis, a demonstrated proof of concept and adhere to the highest industry standards of product development.
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 also manufactured the experimental doses of PHER-O2 required to conduct these tests. 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.
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 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.
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 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. 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. PHER- 02 can be mass-produced and be stored at room temperature for up to three and one half years. 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.
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 CEO and Chairman, Thomas Drees, Ph.D.
We believe that its unique qualities may make PHER-O2 ideal for numerous medical indications, including:
* transportation of pancreas islets for treatment of diabetes;
* ophthalmic retinal surgery;
* angioplasty;
* external oxygenation of infection, ischemic tissue and diabetic ulcers;
* Alzheimer's Disease;
* traumatic brain injury;
* 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.
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.
PHER-O2's anticipated ability to carry oxygen 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 leading our management to believe that PHER-O2 could be 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 FDA approval in 1989, under the guidance of Dr. Thomas Drees our Chairman and CEO. That product was approved for use in angioplasty, the treatment of blocked arteries with small inflated balloons. This application involves the injection of the perfluorocarbon emulsion 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 later announced 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.
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.
We believe there are potentially many drug and pharmaceutical companies working on similar products. We have identified three companies, that we know about, working to develop perfluorocarbon based therapeutics. They include:
* Alliance Pharmaceuticals, San Diego, California;
* Oxygen Biotherapeutics, Inc, Durham, NC;
* Perftoran, Russia.
These competitors are involved in the development of a wide variety perfluorocarbon based therapeutics. This list of competitors is not 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, 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.
We had only one customer in 2010 and given the nature of our products, would not anticipate more than a limited number of customers.
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.
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 perfluorocarbon based therapeutic, 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.
Research and Development Costs During the Last Two Fiscal Years.
Since inception, we have expended a total of approximately $1,991,260 on research and development. During years ended December 31, 2011, and 2010, we had $18,102 in 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 CEO, Thomas C. Drees and our President, Frank Mara. As our product advances and we are able to start obtaining additional contracts for the use of our products in laboratories, we will start expanding our employee base. At this time we do not know the timing of the hiring of any additional employees.
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.
ITEM 2. PROPERTIES
We lease office space in Roswell, Georgia for $900 per month. The lease is on a month to month basis. We previously leased space in Pasadena California. The lease was to run through October 2011 at a monthly rent of $861. We are trying to negotiate with the landlord on a final payment on this property.
ITEM 3.
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.
ITEM 4. MINE SAFETY DISCLOSURES
None, not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the “OTC Bulletin Board” under the symbol under the symbol “SGUI.” The range of high and low bid quotations for our common stock during each quarter of the years ended December 31, 2011, 2010 and 2009, is presented below. Prices are inter-dealer quotations as reported do not necessarily reflect transactions,
retail markups, mark downs or commissions. On April 11, 2012, the bid and ask for our shares was $0.05 and $0.20.
STOCK QUOTATIONS*
Quarter ended:
High
Low
March 31, 2010
$.35
$.17
June 30, 2010
$.51
$.19
September 30, 2010
$.42
$.25
December 31, 2010
$.44
$.25
March 31, 2011
$.30
$.39
June 30, 2011
$.28
$.51
September 30, 2011
$.16
$.30
December 31, 2011
$.17
$.30
* 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.
Holders.
The number of record holders of our common stock as of April 11, 2012, was approximately 567.
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.
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
3,000,000
$0.20
Equity compensation plans not approved by security holders
760,716
$0.11
Total
3,760,716
$0.10
Recent Sales of Unregistered Securities.
Restricted Securities.
During 2008 and 2009, we issued shares to our board of directors and to our medical advisory board for services. All of the shares issued were “restricted” and we believe exempt from registration. 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. The shares were subsequently issued in 2010.
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. 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.
In 2010, we received subscriptions to purchase a total of 133,500 shares of preferred stock at $1 per share for total proceeds of $133,500. As of December 31, 2011, 125,000 of these shares had been issued. 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 from various similar state exemptions.
During the year ended December 31, 2011, the Company executed an employment agreement with the President of the Company which provided 3,000,000 options to purchase the Company’s common stock for an exercise price of $0.20 per share for a 60 month period beginning in February 2011. The options were valued using the Black-Scholes option pricing model, with the following assumptions: dividend yield of zero percent; expected volatility of 176.85%; risk-free interest rate of 2.39%; and expected life of 5 years. The value of the options was $984,975 and was expensed. 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 from various similar state exemptions.
The Company issued 42,000 shares of common stock during the year ended December 31, 2011. The stock was issued as the result of the conversion of two notes payable valued at $9,000 and related accrued interests of $1,318. The stock was issued at $0.29 per share for a total value of $12,180. A loss of $1,862 was recognized in the transaction. 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 from various similar state exemptions.
The Company issued 22,500 shares of common stock during the year ended December 31, 2011, as compensation to the members of the Board of Directors. The shares were valued at $0.35 per share for a total expense of $7,875. 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 from various similar state exemptions.
Also during the year ended December 31, 2011, a holder of 75,000 shares of series A preferred stock exercised the conversion of that preferred stock. As a result the Company issued 500,250 shares of common stock to this stockholder. The number of common shares was determined at the conversion rate of 6 2/3 shares of common stock per share of preferred stock as specified in the conversion terms for the series A preferred shares. 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 from various similar state exemptions.
Use of Proceeds of Registered Securities.
There were no sales of registered securities during 2011 or 2010.
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, 2011.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Summary of Financial Information
We had no revenues in 2011. We had a net loss of $1,430,003 for the year ended December 31, 2011. At December 31, 2011, we had cash of $1,436. We had a negative working capital of $754,297.
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.
STATEMENT OF OPERATIONS DATA:
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Plan of Operation.
General.
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).
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, 2011 and 2010, 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, 2011.
The Company’s accounting policies are more fully described in Note 1 of the audited financial statements. As discussed in Note 1, the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the future events that affect the amounts reported in the financial statements and the accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual differences could differ from these estimates under different assumptions or conditions. The Company believes that the following addresses the Company’s most critical accounting policies.
Revenue Recognition
We recognize revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). Under SAB 104, revenue is recognized at the point of passage to the customer of title and risk of loss, when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured.
Allowance for Doubtful Accounts
Our allowance for doubtful accounts is maintained to provide for losses arising from customers’ inability to make required payments. If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required.
Income Taxes
We account for income taxes in accordance with FASC 740-20, “Accounting for Income Taxes”. Under FASC 740-20, deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
We had no revenues for the calendar years ending December 31, 2011, and revenues of $32,970 for the year ended December 31, 2010. Our 2010 revenues were from the sale of our products to a lab. We had no material operations, except analyzing our product market and attempting to start finding labs interested in our PHER-O2.
We realized a net loss of $1,405,478 for the year ended December 31, 2011, and a net loss of $333,003 for the year ended December 31, 2010. Most of our expense related to the value of equity securities issued by us for services
rendered.
We had research and development expenses of $18,102 in 2011 and none in 2010.
Liquidity.
As of December 31, 2011, we had $1,436 in cash, with $817,423 in current liabilities. We have had to rely on our management to fund operations through loans to the Company and limited stock sales.
During the calendar year ended December 31, 2011, we had operating expenses of $1,378,732, and no revenues. We had operating expenses of $420,997 during the calendar year ended December 31, 2010. Most of these expenses related to the value of equity securities issued by us for services rendered.
Cash resources at December 31, 2011, and 2010, were $1,436 and $1,195, respectively with $28,000 in receivables at December 31, 2010. 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, 2011.
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 perfluorocarbon based therapeutic products, 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 perfluorocarbon based therapeutic products 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 perfluorocarbon based therapeutic products industry, the development of products and that may be superior to the products and services offered by us, demand for perfluorocarbon based therapeutic 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.
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.
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.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure.
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 Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2011. 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 Chief Executive Officer and Principal Financial Officer, concluded that, as of December 31, 2011, 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 that occurred during the last fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10.
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.
Directors and Executive Officers.
Name
Positions Held or
Designation
Date of Election or Resignation
Date of Termination
Frank Marra
CEO,
President,
Director
February 2011
*
*
*
Thomas C. Drees, PhD., MBA
Director
11/95
*
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.
Business Experience.
Frank Marra, age 48, 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.
Thomas C. Drees, Ph.D., MBA, Chairman, and Director. Dr. Drees, age 82, 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.
Edward L. Kunkel, Esq., Director. Mr. Kunkel is 63 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.
Significant Employees.
There are no significant employees.
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.
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, based on a review of the fillings, 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
Share purchases
10/27/04
4/13/05
1/05/05
10/7/05
5/4/06
1/17/07
12/31/08
4/18/05
4/18/05
4/18/05
3/28/08
3/28/08
3/28/08
3/21/11
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 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
Frank Marra
Form 3
5/27/09
6/21/10
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.
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.
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 $100,000 during such period (as determined at December 31, 2011, the end of the Company's last completed fiscal year):
Name and Principal Position
(a)
Year
(b)
Salary
($)
(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)
Frank Marra, Ph.D., MBA, CEO, President, Chairman of the Board
12/31/11
12/31/10
12/31/09
137,500
984,975
1,122,475
On November 21, 2007, we executed a Management Consulting Agreement for a term in perpetuity with Frank Marra, PhD., whereby Dr. Drees was engaged to provide management consulting services. 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. 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 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.
As part of Mr. Marra’s appointment as a director and president of the Company, Mr. Marra entered into an employment agreement and received stock options. Under the terms of Mr. Marra’s employment agreement he will receive an annual salary of one hundred fifty thousand dollars ($150,000) subject to such increases as may from time to time be determined by the board of directors of the Company. Additionally, the term of the contract is for a period of twenty-four (24) months. Mr. Marra received three million (3,000,000) stock options exercisable at twenty cents ($0.20) per share for a period of five years. The options were valued using the Black-Scholes option pricing model, with the following assumptions: dividend yield of zero percent; expected volatility of 176.85%; risk-free interest rate of 2.39%; and expected life of 5 years. The value of the options was $984,975 and was expensed.
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.
Currently, the existing directors are receiving no compensation.
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
In May 2009, 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. This equates to 701,433 shares as of
December 31, 2010. The option expires on December 31, 2013.
A summary of the status of the Company’s outstanding stock options as of December 31, 2011 and December 31, 2010 and changes during the periods then ended is presented below:
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
3,000,000
$0.20
Equity compensation plans not approved by security holders
760,716
$0.11
Total
3,760,716
$0.10
ITEM 12.
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 23, 2012:
Security Ownership of Certain Beneficial Owners.
Name and Address
Number of Shares Beneficially Owned
Percent of Class (1)
Frank Marra, (2)
110 Founders Mill Court
Roswell, GA
4,849,682
44.20%
LKB Partners, LLC (3)
3502 Scotts Lane #1221
Philadelphia, PA 19129
1,849,682
23.20%
Thomas C. Drees (4)
874 Sierra Madre Villa Ve
Pasadena, CA 91107
1,863,282
25.71%
Shahriar Ekbatani
535 North Interlachen Dr. Apt. #206
Winter Park, Florida 32789
500,250
6.90%
______________________
(1) Based upon 7,246,822 shares of outstanding common stock on March 23, 2012 along with the options issuable to Mr. Marra and LKB Partners, LLC as outlined above. All percentages assume the exercise of all options.
(2) In addition to Mr. Marra’s interest in LKB Partners, LLC, Mr. Marra has a stock option to acquire up to 3,000,000 shares of common stock. These options are included as part of his calculations along with his ownership in LKB Partners. Mr. Marra’s percentage calculation assume the exercise of his option and that of LKB Partners outlined in note 3 hereof.
(3) LKB Partners, LLC is controlled by Frank Marra. In addition to the 1,125,000 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 724,682 shares to LKB Partners, LLC.
(4) Dr. Drees owns approximately 1,583,825 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.
Security Ownership of Management.
Name and Address
Number of Shares Beneficially Owned
Percent of Class (1)
Frank Marra
4,849,682
44.20%
Dr. Thomas C. Drees
1,863,282
25.71%
Edward L. Kunkel, Esq.
16 N. Marengo Ave, #517
Pasadena, California 91103
13,125
0.1%
All directors and officers as a group
(three persons)
6,725,089
61.31%
_____________________________
(1) Based upon 7,246,822 shares of outstanding common stock on March 23, 2012, along with the options issuable to Mr. Marra and LKB Partners, LLC as outlined above. All percentages assume the exercise of all options.
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.
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 Company. For 2011 and 2010, related party payables were $357,641 and $182,675, respectively.
On November 21, 2007, we executed an agreement with Thomas Drees , PhD. for a term in perpetuity., 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, as is the case, 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.
The Company issued 42,000 shares of common stock during the year ended December 31, 2011. The stock was issued as the result of the conversion of two notes payable valued at $9,000 and related accrued interests of $1,318. The stock was issued at $0.29 per share for a total value of $12,180. A loss of $1,862 was recognized in the transaction.
The Company issued 22,500 shares of common stock during the year ended December 31, 2011, as compensation to the members of the Board of Directors. The shares were valued at $0.35 per share for a total expense of $7,875.
During 2011, the Company entered into a loan agreement with an investor also controlled by the Company’s president for $20,000. The note carries an interest rate of 10% per annum. The term of the loan is 18 months. The principal and interest on the note may be converted into shares of common stock at the lower of $0.16 or a price equal to that of the thirty day moving average of the bid. Interest expense of this note for the year ended December 31, 2011 was $333.
Related party payables at December 31, 2011, and December 31, 2010, represent amounts owed to officers of the Company for consulting fees and reimbursement of expenses paid of $357,640 and $182,675, respectively. Interest of 6% -15% was computed on the balance of the related party payable and recorded as $11,357 of additional paid in capital and $3,391 of accrued interest.
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.
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, 2011, and December 31, 2010:
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."
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.
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**
Code of Ethics-Form 10KSB for the year ended December 31, 2002**
31.1
302 Certification of Frank Marra
31.2
302 Certification of Frank Marra
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.
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
Date: April 13, 2012
By: /s/ Frank Marra
Frank Marra, CEO, Principal Financial Officer
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 13, 2012
By: /s/Frank Marra
Frank Marra, Director
Date: April 13, 2012
By: /s/Thomas C. Drees
Thomas C. Drees, Ph.D., MBA
Directors
Date: April 13, 2012
By: /s/ Edward L. Kunkel
Edward L. Kunkel, Director
SANGUINE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 and 2010
C O N T E N T S
Report of Independent Registered Public Accounting Firm
F - 2
Consolidated Balance Sheets
F - 3
Consolidated Statements of Operations
F - 5
Consolidated Statements of Shareholders’ Equity (Deficit)
F - 6
Consolidated Statements of Cash Flows
F - 14
Notes to the Consolidated Financial Statements
F - 16
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Sanguine Corporation and Subsidiary
(A Development Stage Company)
Roswell, Georgia
We have audited the accompanying consolidated balance sheets of Sanguine Corporation and Subsidiary (A Development Stage Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and for the period from inception of the development stage on January 18, 1990, through December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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 consolidated financial position of Sanguine Corporation and Subsidiary as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
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 consolidated financial statements, the Company has suffered 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, LLC
HJ & Associates, LLC
Salt Lake City, Utah
April 13, 2012
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
December 31,
December 31,
CURRENT ASSETS
Cash
$
1,436
$
1,195
Accounts receivable
-
28,000
Total Current Assets
1,436
29,195
PROPERTY AND EQUIPMENT, NET
TOTAL ASSETS
$
1,720
$
29,658
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
December 31,
December 31,
CURRENT LIABILITIES
Accounts payable
$
261,814
$
244,359
Accrued interest
14,539
2,330
Related party payable
357,641
182,675
Convertible promissory notes payable, net of debt discounts of $64,461 and $0, respectively
121,739
29,700
Accrued compensation
-
6,075
Total Current Liabilities
755,733
465,139
Total Liabilities
755,733
465,139
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY (DEFICIT)
Preferred stock, 10,000,000 shares authorized of $0.001 par value, 75,000 and 150,000 shares issued and outstanding, respectively
Common stock, 200,000,000 shares authorized of
$0.001 par value, 7,246,822 and 6,682,072 shares
issued and outstanding, respectively
7,247
6,682
Additional paid in capital
9,817,416
8,697,935
Preferred stock subscribed
-
8,500
Deficit accumulated during the development stage
(10,578,751)
(9,148,748)
Total Shareholders’ Equity (Deficit)
(754,013)
(435,481)
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY (DEFICIT)
$
1,720
$
29,658
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity (Deficit)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
The accompanying notes are an integral part of these consolidated financial statements.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
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.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
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:
The Company’s outstanding stock options have been excluded from the 2011 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.
Net deferred tax liabilities asset consists of the following components as of December 31, 2011 and 2010:
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Income Taxes (continued)
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, 2011 and 2010 due to the following:
At December 31, 2011, the Company had net operating loss carryforwards of approximately $2,660,000 that may be offset against future taxable income from the year 2012 through 2031. No tax benefit has been reported in the December 31, 2011 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.
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 2008.
Included in the balance at December 31, 2011 and 2010, 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.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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:
Depreciation expense for the years ended December 31, 2011 and 2010, amounted to $179 and $253, respectively.
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. The Company produces a perflurcarbon emulsion under the name PHER-02 that is being readied for pre-clinical and clinical testing for a number of various medical indications.
j. Newly Adopted Accounting Pronouncements
The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its 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.
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.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2009
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. As of December 31, 2011 and 2010, no cash balances exceeded this limit.
o.
Accounts Receivable
The Company writes off trade receivables when deemed uncollectible. The Company estimates allowance for doubtful accounts based on the aged receivable balances and historical losses. The Company charges off uncollectible accounts when management determines there is no possibility of collecting the related receivable. The Company expensed $0 to bad debt expense for the years ended December 31, 2011 and 2010. The allowance for doubtful accounts balance at December 31, 2011 and 2010 was $0.
NOTE 2 -
RELATED PARTY TRANSACTIONS
Related party payables at December 31, 2011 and December 31, 2010 represent amounts owed to officers of the Company for consulting fees and reimbursement of expenses paid of $357,640 and $182,675, respectively. Interest of 6% -15% was computed on the balance of the related party payable and recorded as $11,357 of additional paid in capital and $3,391 of accrued interest.
During the current year, the Company executed an employment agreement with the President of the Company. Under the terms of this agreement 3,000,000 options to purchase shares of common stock for $0.20 per share for a period of 60 months were granted to the President. Also, the President’s annual salary was set at $150,000 per year. The agreement expires in February 2013 unless it is extended by mutual agreement of the Company and the President.
NOTE 3 -
COMMITMENTS AND CONTINGENCIES
During February 1994, the Company entered into a lease for office space in Pasadena, California. The lease was extended through October 2011, with monthly rent payments of $861. The lease was not renewed.
During 2011, the Company entered into a lease for office space in Roswell, Georgia. The lease is on a month to month basis, with monthly payments of $900.
Rent expense was $13,355 and $14,736 for the years ended December 31, 2011 and 2010, respectively.
Employment Agreements
Effective December 31, 2010, the Company resolved to discontinue the employment agreements where the CEO, CFO and Vice President were each entitled to receive 625 shares of common stock of the company which are considered to be restricted securities. They resolved to provide compensation for the prior three years of services and give them each 7,500 shares of common stock as complete compensation for the prior three years of service as directors with no other payments to be provided. The value of these shares that have been accrued at December 31, 2010 was $6,075. The Company issued the 22,500 shares of common stock during the year ended December 31, 2011. The shares were valued at $0.35 per share for a total expense of $7,875.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
NOTE 4 -
EQUITY TRANSACTIONS
During the year ended December 31, 2011, the Company executed an employment agreement with the President of the Company which provided 3,000,000 options to purchase the Company’s common stock for an exercise price of $0.20 per share for a 60 month period beginning in February 2011. The options were valued using the Black-Scholes option pricing model, with the following assumptions: dividend yield of zero percent; expected volatility of 176.85%; risk-free interest rate of 2.39%; and expected life of 5 years. The value of the options was $984,975 and was expensed.
The Company issued 42,000 shares of common stock during the year ended December 31, 2011. The stock was issued as the result of the conversion of two notes payable valued at $9,000 and related accrued interests of $1,318. The stock was issued at $0.29 per share for a total value of $12,180. A loss of $1,862 was recognized in the transaction.
The Company issued 22,500 shares of common stock during the year ended December 31, 2011, as compensation to the members of the Board of Directors. The shares were valued at $0.35 per share for a total expense of $7,875.
Also during the year ended December 31, 2011, a holder of 75,000 shares of series A preferred stock exercised the conversion of that preferred stock. As a result the Company issued 500,250 shares of common stock to this stockholder. The number of common shares was determined at the conversion rate of 6 2/3 shares of common stock per share of preferred stock as specified in the conversion terms for the series A preferred shares.
During the year ended December 31, 2010 the Company received subscriptions to purchase a total of 132,500 shares of preferred stock at $1 per share for total proceeds of $132,500. During the year ended December 31, 2010, 125,000 of these shares were issued. During the year ended December 31, 2011, the remaining $8,500 of these subscriptions was converted into a convertible promissory note.
NOTE 5 -
STOCK OPTIONS AND WARRANTS
In May 2009, 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. This equates to 701,433 shares as of December 31, 2010. The option expires on December 31, 2013.
A summary of the status of the Company’s outstanding stock options as of December 31, 2011 and December 31, 2010 and changes during the periods then ended is presented below:
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
NOTE 5 -
STOCK OPTIONS AND WARRANTS (continued)
NOTE 6 -
CONVERTIBLE PROMISSORY NOTES PAYABLE
During 2011, the Company entered into a convertible promissory note agreement with an investor for $20,000. The note carries an interest rate of 10% per annum. The term of the loan is 18 months. The principal and interest on the note may be converted into shares of common stock at the lower of $0.16 or a price equal to that of the thirty day moving average of the adjusted closing price for the Company’s common stock. Interest expense on this note for the year ended December 31, 2011 was $333. In accordance with FASB ASC 470 a beneficial conversion feature was recognized as a debt discount of $5,000 upon the issuance of this loan which will be amortized over the life of the loan. As of December 31, 2011, $556 of the discount had been amortized to interest expense.
During 2010, the Company entered into a loan agreement with an investor. The note carried an interest rate of 7% per annum. During the year ended December 31, 2011, the Company received $137,000 in proceeds from additional loans made under this agreement. The balance of this loan at December 31, 2011 and December 31, 2010, was $166,200 and $20,700, respectively, along with accrued interest of $10,815 and $583, respectively. Effective August 1, 2011, a new agreement was entered into converting the note to a senior convertible promissory note, with a term of 18 months and an interest rate of 10% per annum. The principal balance at that date was $166,200. Interest payments of $4,155 are due on a quarterly basis. The principal and interest on the note may be converted into shares of common stock at the lower of $0.20 or a price equal to that of the thirty day moving average of the adjusted closing price for the Company’s common stock. As of December 31, 2011, the Company has not paid the quarterly interest payment due and a waiver of the initial interest payment requirement has been received from the note holder. In accordance with FASB ASC 470 a beneficial conversion feature was recognized as a debt discount of $83,100 upon entry into the new agreement to be amortized over the life of the loan. As of December 31, 2011, $23,083 of the discount had been amortized to interest expense.
During 2009, the Company entered into loan agreements with investors for $9,000. The notes carried an interest rate of 7% and were due on demand. During the year ended December 31, 2011, the investors signed a letter of agreement to convert the notes, including any accrued interest, into 42,000 shares of restricted common stock. Interest expense on these notes for the year ended December 31, 2011 was $315.
SANGUINE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
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 $10,578,751 at December 31, 2011 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
In February 2012, the Company received $21,000 from an existing investor. The terms of this additional amount loaned are the same as the previous agreement with this investor. The note is a senior convertible promissory note, with a term of 18 months and an interest rate of 10% per annum. The principal and interest on the note may be converted into shares of common stock at the lower of $0.20 or a price equal to that of the thirty day moving average of the adjusted closing price for the Company’s common stock.
We have evaluated subsequent events pursuant to ASC Topic 855 and have determined that there are no additional events that require disclosure.