UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

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

For the transition period from __________ to __________

Commission File Number 000-24480

Sanguine Corporation

(Exact name of registrant as specified in its charter)

Nevada

95-4347608

(State or other jurisdiction of

(IRS Employer Identification No.)

incorporation or organization)

101 East Green Street, #6, Pasadena, California  

  91105

 (Address of principal executive offices)  (Zip Code)

(626) 405-0079

 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]   No [   ]

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

Yes [  ]  No  [  ]

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

Large Accelerated filer ¨

Accelerated filer ¨

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

Smaller reporting company x

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

Yes [  ]   No [X]

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

6,682,072 shares of $0.001 par value common stock on November 16, 2010

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Sanguine Corporation

FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2010

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

SANGUINE CORPORATION & SUBSIDIARY

(A Development Stage Company)

 Consolidated Balance Sheets

ASSETS

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

SANGUINE CORPORATION & SUBSIDIARY

(A Development Stage Company)

Consolidated Balance Sheets (Continued)

LIABILITIES AND SHAREHOLDERS’ DEFICIT

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

SANGUINE CORPORATION & SUBSIDIARY

(A Development Stage Company)

 Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)

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

SANGUINE CORPORATION & SUBSIDIARY

(A Development Stage Company)

 Consolidated Statements of Cash Flows

(Unaudited)

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 (Continued)

(Unaudited)

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

SANGUINE CORPORATION & SUBSIDIARY

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2010 and December 31, 2009

NOTE 1 -

BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company’s most recent audited financial statements and notes thereto included in its December 31, 2009 Annual Report on Form 10-KSB.  Operating results for the three and nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

NOTE 2 -

ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

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

SANGUINE CORPORATION & SUBSIDIARY

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2010 and December 31, 2009

NOTE 2 -

ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)

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.

NOTE 3 -

GOING CONCERN

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

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

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

SANGUINE CORPORATION & SUBSIDIARY

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2010 and December 31, 2009

NOTE 4 -

STOCK WARRANTS AND OPTIONS

The Company had no outstanding stock warrants during the nine months ended September 30, 2010, and the year  ended December 31, 2009.  A summary of the status of the Company’s outstanding stock options as of September 30, 2010 and December 31, 2009 and changes during the periods then ended is presented below:

NOTE 5 -

RELATED PARTY TRANSACTIONS

Related party payables at September 30, 2010 and December 31, 2009  represent amounts owed to officers of the Company for consulting fees and reimbursement of expenses paid of $176,375 and $122,428, respectively.  

NOTE 6 -

SUBSEQUENT EVENTS

Subsequent to September 30, 2010, the Company received $50,000 in a stock subscription agreement to subscribe for 50,000 shares of Series A Convertible Preferred Stock at a price of $1 per share.  In November 2010, the board approved the issuance of 125,000 shares of the Series A Convertible Preferred Stock in fulfillment of a portion of the $83,500 in subscription disclosed on the balance sheet as well as the 50,000 shares in this footnote.

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

Special Note Regarding Forward-Looking Statements

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

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.  The Company believes there have been no significant changes during the nine month periods ended September 30, 2010 and 2009, to the items disclosed as significant accounting policies since the Company’s last audited financial statements for the year ended December 31, 2009.

The Company’s accounting policies are more fully described in Note 1 of the consolidated financial statements included in our Form 10K for the year ended December 31, 2009.  As discussed in Note 1, the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual 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.

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

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

Plan of Operation.

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

Patents

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

Results of Operations

The Company had sales of $4,970 during the quarter ended September 30, 2010.  The Company continues to focus on the development of its products.  As such, the Company has not had substantial revenue in either the quarter ended September 30, 2010 or 2009, having had no revenues in 2009.  We continue to focus on the research and development activities related to our PHER-O2 and are focusing more on its use in research labs around the world.

In accordance with the Company’s development plan, during the third quarter the Company teamed with VCURES, a collaboration of medical researchers, physicians and engineers at Virginia Commonwealth University created to address survival rates of trauma patients, to assist in the pre-clinical advancement of PHER-O2. It is the Company’s intent during the fourth quarter, as part of financing obtained during the third quarter, to complete the preparation and submission of a 510k application to the US FDA for PHER-02 as a medical device.

We realized a net loss of $95,034 for the quarter ended September 30, 2010, and a net loss of $127,288 for the quarter ended September 30, 2009.  For the nine months ended September 30, 2010 and 2009, we had a net loss of $244,200 and $286,866, respectively. Most of our expense related to professional fees for the quarter ended September 30, 2010.  For the quarter ended September 30, 2009, most of our expenses also related to professional fees.  Since we have limited revenues, we have had to rely on stock sales and loans to fund our operations and continue to increase our payables since we do not have the funds to pay all of our expenses.

With the focus the last three months on evaluating our business model, our research and development expenses were $0 for the quarter ended September 30, 2010.   However, as we move more to selling products to labs around the country, our selling, general and administrative expenses have been increasing.  For the quarter ended September 30, 2010, our selling, general and administrative expenses were $14,658 compared to $5,305 for the same period in 2009. For the nine moths ended September 30, 2010, our selling, general and administrative expenses were $29,063 compared to $28,176 for the same period in 2009.  We are hopeful these selling efforts are paying off and hope to be able to start shipping product to labs around the country in the upcoming quarters.

Liquidity and Capital Resources

As of September 30, 2010, we had $46,495 in cash and $89,579 in prepaid expenses related to prepayment of consulting fees, with $541,754 in current liabilities. Our cash position is not sufficient to cover our accounts payable or other current liabilities with working capital at September 30, 2010, of negative $405,680.  If prepaid expenses are removed from current assets, our working capital position is even worse with $495,259 in negative working capital.  Since the end of the quarter, our cash position has worsened as we paid ongoing expenses. As such we will be dependent on our ability to raise additional debt or equity capital to be able to cover current liabilities.   

Off-balance sheet arrangements

We had no off-balance sheet arrangements during the quarter ended September 30, 2010.

Forward-looking Statements

Our Company and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Annual Report and other filings with the Securities and Exchange Commission and in reports to our Company’s stockholders. Management believes that all statements that express expectations and projections with respect to future matters, as well as from developments beyond our Company’s control including changes in global economic conditions are forward-looking statements within the meaning of the Act. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance, however, that management’s expectations will necessarily come to pass. Factors that may affect forward- looking statements include a wide range of factors that could materially affect future developments and performance, including the following:

Changes in Company-wide strategies, which may result in changes in the types or mix of businesses in which our Company is involved or chooses to invest; changes in U.S., global or regional economic conditions, changes in U.S. and global financial and equity markets, including significant interest rate fluctuations, which may impede our Company’s access to, or increase the cost of, external financing for our operations and investments; increased competitive pressures, both domestically and internationally, legal and regulatory developments, such as regulatory

actions affecting environmental activities, the imposition by foreign countries of trade restrictions and changes in international tax laws or currency controls; adverse weather conditions or natural disasters, such as hurricanes and earthquakes, labor disputes, which may lead to increased costs or disruption of operations.

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

NA-Small Reporting Company

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Management’s Report on Internal Control over Financial Reporting

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

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

Our management, with the participation of the President and CFO, evaluated the effectiveness of our internal control over financial reporting as of September 30, 2010.  Based on this evaluation, our management, with the participation of the President and CFO, concluded that, as of September 30, 2010, our internal control over financial reporting was effective.

Changes in internal control over financial reporting

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

PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

None

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

Recent Sales of Unregistered Securities

In October 2009, we sold 20,000 shares of our preferred stock.  The sale was for proceeds of $20,000.  The shares were sold to two investors.  The preferred stock is convertible into 6 2/3 shares of common stock per preferred stock.  As such the preferred stock is convertible into approximately 133,333 shares of common stock.  During the three months ended  March 31, 2010, the Company received a subscription to purchase a total of 8,500 shares of preferred stock at $1 per share for total proceeds fo$8,500.  As of September 30, 2010, none of these preferred shares were issued. In November 2010, the board of directors of the Company accepted subscriptions for the purchase of shares of our Series A Preferred Stock with a purchase price of $125,000.

Use of Proceeds of Registered Securities

None; not applicable.

Purchases of Equity Securities by Us and Affiliated Purchasers

During the three months ended September 30, 2010, we have not purchased any equity securities nor have any officers or directors of the Company.

ITEM 3.  Defaults Upon Senior Securities

We are not aware of any defaults upon senior securities.

ITEM 4.  Removed and Reserved

ITEM 5.  Other Information.

In July 2010, we entered into a loan agreement with Wharton Capital, LLC which is affiliated with Frank Marra. Wharton loaned the company $27,500 to fund short term cash needs under the terms of the loan which is to be paid back in four installments through March 1, 2011.  At this time, we have not been able to repay the loan under its terms but have not received notice of default from Wharton.  The loan interest rate is seven percent per annum and is secured by 250,000 shares of our common stock.

ITEM 6.  Exhibits

(a)

Exhibits.

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

Exhibit

Number               Description

3.2

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

12/23/2005**

3.3

Amendment to Articles of Incorporation – Designation of Rights, Privileges, and Preferences of 2009

Series A Convertible Preferred Stock – This Filing

3.4

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

10.3

Loan Agreement – Wharton Capital, LC

14

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

31.1

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

31.2

302 Certification of David E. Nelson

32

906 Certification

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

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

SIGNATURES

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

Sanguine Corporation

(Registrant)

Date: November 19, 2010

By: /s/ Thomas C. Drees

Thomas C. Drees, Ph.D., MBA

CEO and Chairman of the

Board of Directors

Date: November 19, 2010

By: /s/ David E. Nelson

David E. Nelson, CPA

CFO/Principal Financial Officer and Director