CONFIDENTIAL PRIVATE OFFERING MEMORANDUM No.
Name of Offeree
SANGUINE CORPORATION
$2,000,000 Minimum - $5,000,000 Maximum
Up to 10,000,000 Units, each Unit consisting of two shares of Common Stock
and one Redeemable Common Stock Purchase Warrant entitling the holder to
purchase one share of Common Stock.
Offering Price: $.50 per Unit
Minimum Subscription: $250,000
THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM HAS NOT BEEN FILED WITH OR
REVIEWED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER
COMMISSION OR REGULATORY AUTHORITY, AND HAS NOT BEEN FILED WITH OR REVIEWED BY
THE ATTORNEY GENERAL OF THE STATES OF NEW YORK OR NEW JERSEY OR ANY OTHER
STATE NOR HAS ANY SUCH COMMISSION, AUTHORITY OR ATTORNEY GENERAL DETERMINED
WHETHER IT IS ACCURATE OR COMPLETE OR PASSED UPON OR ENDORSED THE MERITS OF
THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THIS OFFERING MEMORANDUM CONTAINS MATERIAL NON-PUBLIC INFORMATION. THE
CONTENTS OF THIS MEMORANDUM MAY NOT BE USED BY ANY PERSON IN CONNECTION WITH
THE OFFER, PURCHASE OR SALE OF SECURITIES OF THE COMPANY. ANY UNAUTHORIZED
USE HEREOF MAY RESULT IN CIVIL OR CRIMINAL PENALTY.
In the event you decide not to participate in this offering please return the
Confidential Private Offering Memorandum and the Subscription Booklet to the
principal office of the Placement Agent as set forth below.
Laidlaw Global Securities, Inc.
100 Park Avenue
New York, New York 10017
212-376-8800
The date of this Memorandum is May 18, 2000
SANGUINE CORPORATION
$2,000,000 Minimum - $5,000,000 Maximum
Up to 10,000,000 Units, each Unit consisting of two shares of
Common Stock and one Redeemable Common Stock Purchase Warrant entitling the
holder
to purchase one share of Common Stock.
THESE ARE SPECULATIVE SECURITIES AND
INVOLVE A HIGH DEGREE OF RISK.
See "RISK FACTORS" Pages 6-11
Offering Price: $.50 per Unit
Minimum Investment: $250,000
Sanguine Corporation (the "Company" or "Sanguine") is offering to sell to
certain "accredited investors" (the "Offering") up to 10,000,000 Units (the
"Units") of the Company's securities, each Unit consisting of two shares of
Common Stock, par value $.001 per share (the "Shares") and one Redeemable
Common Stock Purchase Warrant (the "Warrants") through Laidlaw Global
Securities, Inc. (the "Placement Agent"), as exclusive agent for the sale of
the Units. Each Warrant entitles the holder to purchase one share of Common
Stock of the Company (the "Warrant Shares"), at an exercise price equal to
$.40 per share, subject to adjustment in certain circumstances. The Warrants
are exercisable at any time commencing on the date of issuance and terminating
four years thereafter. Commencing one year after issuance, the Warrants are
redeemable, in whole or in part, at the option of the Company, for $.05 per
Warrant on not less than thirty days prior written notice, at any time,
provided that (i) the closing bid price of the Company's Common Stock is at
least 200% of the then current exercise price and the trading volume of the
Common Stock is not less than 50,000 shares per day, on each of the 20
consecutive trading days ending within 10 days of the date of the notice of
redemption; and (ii) the Warrant Shares have been registered for public
distribution under the Securities Act of 1933, as amended (the "Act").
The Units are being offered on a "best efforts, all or none" basis as to
the 4,000,000 Unit minimum, and on a "best efforts" basis as to the balance of
the 10,000,000 Unit maximum, by the Placement Agent. All proceeds received by
the Company from subscribers for the Units offered hereby will be deposited by
the Placement Agent in a special non-interest bearing account. If at least
4,000,000 units (the "Minimum Offering") offered hereby have not been
subscribed for by the close of business on July 30, 2000 unless extended by
the Company and the Placement Agent for up to an additional thirty days (such
period, as same may be extended, being hereinafter referred to as the
"Offering Period"), all proceeds received from subscribers will be refunded in
full, without deduction and without interest. If at least 4,000,000 Units are
subscribed for prior to expiration of the Offering Period, a closing (the
"Initial Closing") will be held as soon as practicable thereafter and the
funds held in the special account will be turned over to the Company and the
Company will continue to accept additional subscriptions for Units for the
Offering Period up to a maximum of 10,000,000 Units. In the event
subscriptions for the minimum number of Units are not received during the
Offering Period, all subscriptions will be returned to the subscriber without
interest or deduction. The Company and the Placement Agent, in their
discretion, may accept subscriptions for less than 500,000 Units ($250,000)
and may increase the maximum number of Units offered to 11,000,000 Units.
Offering Price Placement Agent Proceeds to
Commission(1) the Company(2)
Per Unit $.50 $.04 $.46
Total Minimum $2,000,000 $160,000 $1,840,000
Total Maximum $5,000,000 $400,000 $4,600,000
Footnotes on following page
LAIDLAW GLOBAL SECURITIES, INC.
100 Park Avenue
New York, NY 10017
(212) 376-8800
Footnotes from previous page
________________________________________
(1) Does not include (i) additional compensation payable to the Placement
Agent including a non-accountable expense allowance of 2% of the gross
proceeds ; (ii) reimbursement of accountable expenses; and (iii) warrants
to purchase 10% of the Units sold in this Offering exercisable at $.001
per Unit. The Company has also agreed to indemnify the Placement Agent
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). See "Plan of
Distribution."
(2) After deducting Placement Agent commissions, but before deducting other
expenses of this Offering to be paid by the Company for filing, legal,
accounting, printing and other costs and expenses, estimated to be
$50,000. See "Use of Proceeds."
(3) The Company, with the consent of the Placement Agent, may increase the
number of Shares offered hereby which may result in a Total Maximum of
$5,500,000 and related increases in Placement Agent commissions, non-
accountable expense allowance and Agent Warrants.
This confidential private offering memorandum (the "Memorandum") has been
prepared by and for the Company in connection with the proposed offering
through the Placement Agent. The information contained herein has not been
independently verified by the Placement Agent. Accordingly, there can be no
representation by the Placement Agent as to the completeness or accuracy of
such information. Officers, directors and employees of the Company and the
Placement Agent may purchase Units in the Offering, which purchases may be
used to satisfy the Minimum Offering.
No person is authorized by the Company to give any information or make any
representations other than as contained in this Memorandum in connection with
the Offering and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company.
There is currently no market for the Units or Warrants being offered, and it
is not anticipated that a market will develop after the Offering has been
consummated. The Units, Shares and Warrants being offered hereby and the
underlying securities are "restricted securities" within the meaning of Rule
144 promulgated under the Securities Act and are subject to substantial
restrictions on resale and transfer. The Offering Price of the Units has been
determined through negotiations between the Company and the Placement Agent
and bears no relationship to the assets, earnings or any other recognized
criteria of value of the Company. The Offering Price of the Units should not
be viewed as any indication of the value or potential value of the Units or
the underlying securities. See "Risk Factors."
Prior to accepting subscription and payment for any Units during the Offering
Period, all proceeds of the Offering will be deposited in a special account
with Donaldson, Lufkin & Jenrette Securities Corp., Pershing Division. In the
event subscriptions are not accepted, any unaccepted subscriptions will be
returned to subscribers without interest or deduction. See "The Offering."
THE OFFERING COMMENCED ON THE DATE OF THIS CONFIDENTIAL PRIVATE OFFERING
MEMORANDUM AND SHALL TERMINATE ON THE CLOSE OF BUSINESS ON JULY , 2000
UNLESS EXTENDED BY THE COMPANY AND THE PLACEMENT AGENT FOR UP TO AN ADDITIONAL
THIRTY DAYS OR AT AN EARLIER DATE UPON COMPLETION OF THE OFFERING. THE
PLACEMENT AGENT AND THE COMPANY MAY DETERMINE TO CLOSE THE OFFERING PRIOR TO
THE EXPIRATION OF THE OFFERING PERIOD, IN WHICH EVENT THE OFFERING WILL
CONTINUE TO THE EARLIER TO OCCUR OF THE SALE OF THE REMAINING UNITS OR THE
EXPIRATION OF THE OFFERING PERIOD.
INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK AND ONLY PERSONS WHO
ARE ABLE TO BEAR THE FINANCIAL RISK OF A COMPLETE LOSS OF THEIR INVESTMENT
SHOULD CONSIDER PURCHASING UNITS. SEE "RISK FACTORS." RISKS INVOLVED IN THE
PURCHASE OF THE UNITS OFFERED HEREBY INCLUDE, AMONG OTHERS, THE RISK THAT
THERE IS NO PUBLIC OR OTHER MARKET FOR THE SECURITIES UNDERLYING THE UNITS,
NOR IS SUCH A MARKET EXPECTED TO DEVELOP. THE SECURITIES UNDERLYING THE UNITS
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT PURSUANT TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN EXEMPTION THEREFROM. FOR THESE REASONS, A SUBSCRIBER MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT AND TO RETAIN OWNERSHIP OF THE
UNITS FOR AN INDEFINITE PERIOD OF TIME. SEE "INVESTOR QUALIFICATIONS."
____________________
THIS MEMORANDUM INCLUDES FORWARD-LOOKING INFORMATION. SUCH INFORMATION IS
BASED ON ASSUMPTIONS AS TO FUTURE EVENTS THAT ARE INHERENTLY UNCERTAIN AND
SUBJECTIVE. THE COMPANY MAKES NO REPRESENTATION OR WARRANTY AS TO THE
ATTAINABILITY OF SUCH ASSUMPTIONS OR AS TO WHETHER FUTURE RESULTS WILL OCCUR
AS PROJECTED. IT MUST BE RECOGNIZED THAT THE PROJECTIONS OF THE COMPANY'S
FUTURE PERFORMANCE ARE NECESSARILY SUBJECT TO A HIGH DEGREE OF UNCERTAINTY,
THAT ACTUAL RESULTS CAN BE EXPECTED TO VARY FROM THE RESULTS PROJECTED AND
THAT SUCH VARIANCES MAY BE MATERIAL AND ADVERSE. PROSPECTIVE INVESTORS ARE
EXPECTED TO CONDUCT THEIR OWN INVESTIGATION WITH REGARD TO THE COMPANY AND ITS
PROSPECTS.
THERE ARE NUMEROUS DOCUMENTS WHICH ARE RELEVANT TO THE TRANSACTIONS
CONTEMPLATED BY THIS MEMORANDUM WHICH DESCRIBE THE TRANSACTIONS AND RIGHTS AND
OBLIGATIONS OF THE RESPECTIVE PARTIES. THE STATEMENTS CONTAINED IN THIS
MEMORANDUM CONSTITUTE A BRIEF SUMMARY OF THE MATERIAL PROVISIONS OF SUCH
DOCUMENTS, DO NOT PURPORT TO BE A COMPLETE DESCRIPTION OF EVERY TERM AND
CONDITION AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH DOCUMENTS.
IF THERE IS A CONFLICT BETWEEN THE TERMS OF THE DOCUMENTS AND THIS MEMORANDUM,
THE TERMS OF THE DOCUMENTS WILL GOVERN. EACH PERSON CONSIDERING AN INVESTMENT
IN THE COMPANY IS URGED TO REVIEW ALL SUCH DOCUMENTS.
THE COMPANY HAS AGREED (I) TO GRANT, PRIOR TO THE CONSUMMATION OF THE SALE OF
THE UNITS, TO EACH PROSPECTIVE SUBSCRIBER AND HIS REPRESENTATIVE(S), THE
OPPORTUNITY TO REVIEW ADDITIONAL DOCUMENTS AND TO ASK QUESTIONS OF, AND TO
RECEIVE ANSWERS FROM, THE OFFICERS OF THE COMPANY CONCERNING THE TERMS AND
CONDITIONS OF THIS OFFERING OR ANY OTHER MATTER SET FORTH HEREIN; AND (II) TO
SUPPLY ANY ADDITIONAL INFORMATION, TO THE EXTENT THE COMPANY POSSESSES SUCH
INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE,
NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH HEREIN.
______________
NO ADVERTISING OR OFFERING LITERATURE IN ANY FORM MAY BE EMPLOYED IN THE
OFFERING OF THE UNITS, EXCEPT FOR THIS MEMORANDUM. NO PERSON (OTHER THAN THE
OFFICERS OF THE COMPANY AND PERSONS AUTHORIZED TO ACT ON ITS BEHALF) IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS MEMORANDUM AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON. NEITHER THE DELIVERY OF THIS
MEMORANDUM NOR ANY SALES MADE HEREUNDER, UNDER ANY CIRCUMSTANCES, SHALL CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED
HEREIN SINCE THE DATE HEREOF. HOWEVER, IN THE EVENT OF ANY MATERIAL CHANGE,
THIS MEMORANDUM WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
THIS MEMORANDUM IS SUBMITTED IN CONNECTION WITH THE PRIVATE PLACEMENT OF THE
UNITS AND DOES NOT CONSTITUTE AN OFFER TO OR SOLICITATION OF ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED. IN
ADDITION, THIS MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE PERSON WHOSE NAME
AND IDENTIFICATION NUMBER APPEARS IN THE APPROPRIATE SPACES PROVIDED ON THE
COVER PAGE OF THIS MEMORANDUM. ANY REPRODUCTION OR DISTRIBUTION OF THIS
MEMORANDUM, IN WHOLE OR IN PART OR THE DIVULGENCE OF ANY OF ITS CONTENTS,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, IS PROHIBITED. ANY PERSON
ACTING CONTRARY TO THE FOREGOING RESTRICTIONS MAY PLACE HIMSELF AND THE
COMPANY IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS. BY ACCEPTING THIS
MEMORANDUM, THE RECIPIENT AGREES TO RETURN THE SAME PROMPTLY UPON REACHING A
DECISION NOT TO MAKE AN INVESTMENT IN THE COMPANY AND, IN ANY EVENT, PROMPTLY
UPON A REQUEST THEREFOR.
_______________________
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR
ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM OR WITH THE COMPANY, OR ANY
PROFESSIONAL ASSOCIATED WITH THE OFFERING, AS LEGAL OR PROFESSIONAL TAX
ADVICE. PROSPECTIVE SUBSCRIBERS ARE ADVISED TO CONSULT WITH THEIR OWN TAX
COUNSEL AND LEGAL, ACCOUNTING AND OTHER PERSONAL ADVISORS CONCERNING THE TAX,
LEGAL AND OTHER ASPECTS OF THE PURCHASE AND OWNERSHIP OF UNITS AND POTENTIAL
CHANGES IN APPLICABLE LAW.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND, CONSEQUENTLY, IS SUITABLE
ONLY FOR PERSONS OF SUBSTANTIAL MEANS WHO HAVE NO NEED FOR LIQUIDITY, WHO CAN
AFFORD A TOTAL LOSS OF THEIR INVESTMENT, AND WHO UNDERSTAND, OR HAVE BEEN
ADVISED AS TO, THE LONG-TERM NATURE AND INVESTMENT CONSIDERATIONS ASSOCIATED
WITH THIS INVESTMENT. SEE "RISK FACTORS".
THE COMPANY AND THE PLACEMENT AGENT RESERVE THE RIGHT, IN THEIR SOLE
DISCRETION AND FOR ANY REASON WHATSOEVER, TO MODIFY, AMEND AND/OR WITHDRAW ALL
OR ANY PORTION OF THIS OFFERING AND/OR ACCEPT OR REJECT IN WHOLE OR IN PART
ANY PROSPECTIVE INVESTMENT IN THE UNITS OR TO ALLOT TO ANY PROSPECTIVE
INVESTOR LESS THAN THE AMOUNT OF UNITS SUCH INVESTOR DESIRES TO PURCHASE.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE COMPANY AND THE
PLACEMENT AGENT WILL ONLY OFFER AND SELL UNITS TO PERSONS WHO THEY BELIEVE
MEET THE SUITABILITY STANDARDS SET FORTH IN THIS MEMORANDUM. SEE "INVESTOR
QUALIFICATIONS." THE COMPANY SHALL HAVE NO LIABILITY WHATSOEVER TO ANY
PROSPECTIVE INVESTOR AND/OR INVESTOR IN THE EVENT THAT ANY OF THE FOREGOING
SHALL OCCUR.
THIS OFFER AND SALE OF THE UNITS HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OR ANY STATE SECURITIES LAWS, IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION PROVIDED BY SECTION 4(2) AND/OR 4(6) OF THE SECURITIES ACT AND
REGULATION D PROMULGATED THEREUNDER AND SIMILAR EXEMPTIONS FROM REGISTRATION
PROVIDED BY CERTAIN STATE SECURITIES LAWS. THE UNITS WILL BE OFFERED ONLY TO
ACCREDITED INVESTORS WHO HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE UNITS
TO BE OFFERED AND SOLD IN RELIANCE UPON SUCH EXEMPTIONS.
NOTICE TO NON-U.S. RESIDENTS. IT IS THE RESPONSIBILITY OF ANY PERSONS WISHING
TO PURCHASE THE UNITS TO SATISFY THEMSELVES AS TO FULL OBSERVANCE OF THE LAWS
OF ANY RELEVANT TERRITORY OUTSIDE THE U.S. IN CONNECTION WITH ANY SUCH
PURCHASE, INCLUDING OBTAINING ANY REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR
OBSERVING ANY OTHER APPLICABLE FORMALITIES.
INVESTORS AND THEIR REPRESENTATIVES, IF ANY, SHOULD REVIEW THE FOLLOWING
LEGENDS REQUIRED BY CERTAIN JURISDICTIONS AND BE AWARE OF THEIR CONTENTS.
PLEASE REVIEW THE FOLLOWING MATERIALS CAREFULLY TO DETERMINE WHETHER ANY OF
THESE LEGENDS ARE APPLICABLE.
NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
FOR FLORIDA RESIDENTS
THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER
IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES ACT.
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.
IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE
PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE
BY SUCH INVESTOR TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR
WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
INVESTOR, WHICHEVER OCCURS LATER.
FOR GEORGIA RESIDENTS
THE SECURITIES OFFERED HEREBY MAY BE ISSUED OR SOLD IN RELIANCE ON PARAGRAPH
(13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973", AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH
ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT.
FOR PENNSYLVANIA RESIDENTS
RESIDENTS OF THE COMMONWEALTH OF PENNSYLVANIA CAN ONLY TRANSFER THESE
SECURITIES IN ACCORDANCE WITH THE PROVISIONS OF SECTION 203(d) OF THE
PENNSYLVANIA SECURITIES ACT AND ARE SUBJECT TO THE FOLLOWING CONDITIONS: (A)
EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR THE SECURITIES BEING OFFERED
HEREBY AGREES NOT TO SELL THESE SECURITIES FOR A PERIOD OF 12 MONTHS AFTER THE
DATE OF PURCHASE; AND (B) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
PENNSYLVANIA SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THEY ARE
SO REGISTERED OR AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE ACT
BECOMES AVAILABLE.
EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR SECURITIES HAS THE RIGHT,
PURSUANT TO SECTION 207 OF THE PENNSYLVANIA SECURITIES ACT OF 1972, TO
WITHDRAW HIS SUBSCRIPTION FOR SECURITIES AND RECEIVE A FULL REFUND OF ALL
MONIES PAID, WITHIN TWO (2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE
ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE. WITHDRAWAL WILL BE
WITHOUT ANY FURTHER LIABILITY TO SUCH PERSON. TO ACCOMPLISH THIS WITHDRAWAL,
A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT THE ADDRESS
SET FORTH IN THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM, INDICATING HIS
INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED
PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY. IT IS ADVISABLE
TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE
THAT IT IS RECEIVED AND TO EVIDENCE THE TIME WHEN IT IS MAILED. IF THE
REQUEST IS MADE ORALLY, IN PERSON OR BY TELEPHONE, TO THE COMPANY, A WRITTEN
CONFIRMATION THAT THE REQUEST TO WITHDRAW HAS BEEN RECEIVED SHOULD BE
REQUESTED.
TABLE OF CONTENTS
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
RECENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . 14
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . 16
INVESTOR QUALIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . 18
EXHIBITS
A. Form 10-KSB for the Fiscal Year Ended December 31, 1999
B. Subscription Agreement
C. Form of Investor Questionnaire
D. Form of Warrant
SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from (i) material contained in the body of this Memorandum, (ii)
the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1999 (the "Form 10-KSB"), a copy of which (without exhibits) is annexed
hereto as Exhibit A and incorporated herein by reference. The summary is
qualified in its entirety by reference to the more detailed information and
financial statements appearing elsewhere in this Memorandum and the exhibits
attached hereto. Each prospective investor is urged to read this Memorandum
and the exhibits attached hereto in their entirety.
The Company
Sanguine Corporation, through its majority-owned subsidiary, Sanguine
Corporation, a California corporation (collectively the "Company" or
"Sanguine"), is engaged in the development of a synthetic red blood cell
product called "PHER-O2." PHER-O2 is a second generation version of Fluosol,
the only FDA-approved synthetic blood product to date. The development of
this product presently is the sole business of the Company. PHER-O2 is
composed of perfluorodecalin molecules (i.e., synthetic red blood cells),
purified water and a proprietary, synthetic, fluorinated surfactant to hold
the emulsion together. Perfluoro-decalin has great oxygen-carrying capacity,
yet its particle can be as much as 900 times smaller than a red blood cell.
Management believes that PHER-O2 may carry three to four times the oxygen of
human blood per unit volume. This increased oxygen-carrying capacity may make
PHER-O2 useful in the treatment of heart attacks, strokes, cancer and other
diseases for which increased oxygenation is beneficial. Furthermore, the
Company believes that perfluoro-decalin may be effective as an imaging agent
in X-ray imaging, nuclear magnetic resonance (NMR) imaging and CAT scans,
without side effects. Management also believes that PHER-O2 has several other
advantages over human blood: it may be sterilized to be free of disease; is
believed to have the quality of a universal match for all blood types; may be
mass-produced; and may be stored much longer than human blood.
Battelle Memorial Institute, located in Columbus, Ohio, was retained
to assist the Company in completing the emulsion of perfluoro-decalin and the
synthetic surfactants that make up PHER-O2. Such research and development
conducted by Battelle Memorial Institute was discontinued due to lack of
funding. The Company believes that upon funding through this Offering, such
research and development will continue, although there can be no assurance
that Battelle will agree to continue to perform the research and development
(see "Risk Factors"). The Company needs to obtain substantial additional
funding for its intended business operations, as to which there can be no
assurance. If the Company obtains such funding, it is anticipated that on
completion of the compounding of PHER-O2, Battelle Memorial Institute will
perform initial gross animal tests, which do not require regulatory approval
prior to commencement; however, the data gathered from any such tests will be
subject to regulatory review in the future. The Company anticipates that it
will manufacture the experimental doses of PHER-O2 required to conduct gross
animal testing.
In its second phase, expected to commence nine months from the start
of the first phase, management intends to continue developing the
perfluorocarbon compounds in PHER-O2 in order to optimize its quality, and
expects to begin animal safety and efficacy trials in accordance with
guidelines of the United States Food and Drug Administration ("FDA") and
comparable foreign regulatory requirements. The second phase of operations is
expected to take approximately 12 months.
In the final phase of the Company's proposed business operations, it
intends to complete its United States human testing of PHER-O2, receive all
necessary FDA approvals and begin American and Canadian sales for cancer
treatment and angioplasty; and complete overseas testing, begin overseas sales
and begin the construction of manufacturing facilities. Sanguine has
previously licensed Biologixs to manufacture and market PHER-O2 in Canada,
including any future Canadian patent rights, and the exclusive right to market
PHER-O2 in U.S. military pre-hospital and ambulance markets. In this final
phase, the Company also intends to continue human trials to test PHER-O2
for other applications, including transplant organ preservation and the
treatment of carbon monoxide poisoning, sickle cell anemia, heart attack,
stroke and transfusions. The Company will be required to conduct similar
rigorous human safety and efficacy testing and clinical trials of PHER-O2 for
each desired application for which it is sought to be used.
PHER-O2 is still in the research and development stage. It has not
been tested on animals or humans; nor has any application been submitted to
any federal, state or foreign agency to seek authority for such testing. This
development process will be time consuming, costly, subject to extreme
governmental regulation and must prove that this product is safe and
efficacious for human use. Until then, the Company will have no potential for
revenues from operations. No assurance can be given that the Company will be
able to raise the capital it will need to develop PHER-O2, or that if
sufficient funds are raised, that the Company will ever receive requisite
federal, state or foreign agency approval to manufacture or market this
product. See "Description of Business" in Part I, Item 1 of the Company's
Form 10-KSB annexed hereto as Exhibit A.
The offices of the Company are currently located at 101 East Green
Street, #11, Pasadena, California 91105 and its telephone number is (626)
405-0079.
The Offering
Securities Offered
Units A minimum of 4,000,000 and a maximum of
10,000,000 Units, each Unit consisting of two
shares of Common Stock and one Redeemable Common
Stock Purchase Warrant. The Units will be offered
on a "best efforts, all or none" basis as to the
4,000,000 Unit minimum and on a "best efforts"
basis as to the balance of the 10,000,000 Unit
maximum, at an offering price of $.50 per Unit.
Terms of the Warrants
Exercise Term Each warrant will entitle the holder to
purchase one share of Common Stock during the
period commencing on the date of issuance and
terminating four years thereafter, unless
redeemed, subject to adjustment in certain
circumstances.
Exercise Price $.40 per share of Common Stock, subject to
adjustment to prevent dilution.
Redemption Commencing one year after issuance, the Warrants
are redeemable, in whole or in part, at the option
of the Company, for $.05 per Warrant on not less
than thirty days prior written notice, provided
that (i) the closing bid price of the Company's
Common Stock is at least 200% of the then current
exercise price; and the trading volume of the
Common Stock is not less than 50,000 shares per
day, on each of the 20 consecutive trading days
ending within 10 days of the date of the notice of
redemption; and (ii) the Warrant Shares have been
registered for public distribution under the
Securities Act.
Minimum Investment $250,000, provided Laidlaw and the Company may
allow investments for smaller quantities in their
discretion
Use of Proceeds Management will have broad discretion in the
application of the proceeds of the Offering. It is
currently anticipated that the Company will use
the net proceeds available to it from this
Offering for research and development, FDA animal
trials, marketing and promotion, joint ventures
and strategic alliances and working capital,
including web site development expenses. See "Use
of Proceeds" herein and "Management's Discussion
and Analysis" in the Company's Form 10-KSB (the
"10-KSB") annexed hereto as Exhibit A.
Risk Factors An investment in the Units involves a high degree
of risk. Prospective purchasers of Units should
carefully review the factors under the heading
"Risk Factors" herein and the 10-KSB prior to
investing in the Units.
Restrictions on
Transferability The Units offered hereby will not be registered
under the Securities Act or under the securities
laws of the United States or of any state or other
jurisdiction. As a result, neither the Units nor
the securities underlying the Units may be
transferred without registration under the
Securities Act, or, if applicable, the securities
laws of any state or other jurisdiction, unless in
the opinion of counsel to the Company, such
registration is not then required because of the
availability of an exemption from registration.
See "Risk Factors" and "Restrictions on Transfer
of Securities" herein and "Market Information" in
the 10-KSB.
Registration Rights The Company has agreed to register for resale
under the Act, the Warrants, Shares and Warrant
Shares in a Registration Statement to be filed by
Company 30 days after the final closing of this
Offering, and to cause the Registration Statement
to become effective within 150 days after the
final closing of this offering. In the event that
the Company fails either to (i) cause the
Registration Statement to be filed under the Act
30 days after the Final Closing, or (ii) cause the
Registration to become effective 150 days after
the final closing, then the exercise price of the
Warrants shall be reduced at the rate of $.05 for
every 30 day delay, or part thereof, in the
effectiveness of the Registration Statement, but
in no event shall the exercise price be reduced
less than $.001 per share. The Company shall keep
the Registration Statement current and effective
until 30 days after the termination of the
exercise period of the Warrants.
Lockup The Company has agreed either (i) to forego
registration of any of its securities other than
the Securities offered herein, for the period
commencing May 8, 2000 and ending one year from
the date of the Final Closing (the "Lockup
Period") without the prior written consent of the
Placement Agent, or (ii) should it elect to
register any of its securities, other than the
Securities offered herein, during the Lockup
Period, the Company must require all holders of
such securities to agree in writing not to sell
such securities during the Lockup Period without
the prior written consent of the Placement Agent.
Investment An investment in the Company is highly speculative
and each investor bears the risk of losing his or
its entire investment. All purchasers must
complete and execute a Subscription Agreement,
which is included in the Investor Subscription
Booklet which is enclosed with this Memorandum.
Purchasers must set forth representations in such
documents that he, she or it is purchasing the
Units for investment purposes only and without a
view toward distribution. The Company has not
entered into any formal discussions or agreements
regarding an initial public offering of its
securities. See "Risk Factors."
Investor Suitability The Units are suitable investments only for
sophisticated investors for whom an investment in
the Units does not constitute a complete
investment program and who fully understand, are
willing to assume, and who have the financial
resources necessary to withstand, the risks
involved in investing in the Units and who can
bear the potential loss of their entire
investment.
Financial Information Financial statements are included in the Form 10-
KSB
Securities of the Company:
Shares of Common Stock
outstanding prior to the
Offering 24,559,323 Shares
Shares of Common Stock
outstanding after the Offering
(assuming the maximum number
of Units are sold) 32,559,323 Shares if the minimum number of
Units offered hereby are sold, and
44,559,323 Shares if the maximum number of
Units are sold.
RECENT EVENTS
On May 9, 2000, the Company filed a registration statement on Form S-8
covering 1,350,000 shares of the Company's $.001 par value common stock. Such
shares have been issued as follows:
Karl Smith 700,000 shares
David E. Nelson 100,000 shares
Leonard W. Burningham 250,000 shares
Anthony G. Hargreaves 300,000 shares
The shares were issued as compensation for various services rendered and
to be rendered to the Company by these individuals. Karl Smith was a
consultant to the Company, David E. Nelson is the Chief Financial Officer and
Director of the Company, Leonard W. Burningham acts as outside counsel to the
Company and Anthony G. Hargreaves is the Vice President, Secretary and
Director of the Company. These individuals have agreed in writing to forego
selling these shares without the prior written consent of the Placement Agent
during the Lockup Period.
Upon the Final Closing, the Company expects to form a medical advisory
board to the Company. As of the date hereof, the Company has identified four
medical doctors whom it expects to fill such board. However, the Company has
entered into no agreements with any individuals in this regard and there can
be no assurance given that the Company will be successful in adding any such
advisors to its proposed medical advisory board.
On April 7, 2000, the Company entered into a loan agreement with
Starpoint Procurement Company, Ltd. ("Starpoint"), which provides that
Starpoint loan $92,000 to the Company for a period of sixty days at 10%
interest. As collateral for such payment, Dr. Thomas Drees, the Company's
President and Chairman of the Board, has agreed to secure the loan with
230,000 shares of his common stock. The loan may be converted into these
shares of Common Stock at the rate of $.40 per share, after which the loan
will be deemed fully paid. The Company has agreed that the shares delivered
to Starpoint be unrestricted, freely trading stock.
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our Company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could
be harmed.
Forward-Looking Statements and Associated Risks
This Confidential Private Offering Memorandum contains forward-looking
statements including statements regarding, among other items, our business
strategy. Those forward-looking statements are based largely on the
expectations of management and are subject to a number of risks and
uncertainties, certain of which are beyond our control. Forward-looking
statements include statements which include the terms "may", "will",
"anticipate", or other similar terms. Actual results could differ materially
from these forward-looking statements as a result of the factors described
under "Risk Factors" and elsewhere herein. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this Confidential Private Offering Memorandum will in fact
transpire or prove to be accurate. All written and oral forward-looking
statements attributable to the Company or persons acting on our behalf are
expressly qualified in their entirety by this section.
No Independent Verification of Products; Need to Enter into New Research and
Development Agreement
The Placement agent has not engaged any independent analyst to determine
the efficacy of the products being developed by the Company. Investors are
therefore relying solely on the statements and beliefs of Sanguine in
determining the viability and potential viability of the products under
development. In addition, although the Company had begun testing and research
and development of its product through Battelle Memorial Institute, due to a
lack of funding, such testing was discontinued and there has been no further
testing whatsoever in the past 18 months. Such research and development by
Battelle Memorial Institute is important to the Company. If the Company fails
to enter into an agreement with Battelle Memorial Institute to continue such
research and development, this would have a material, adverse effect on the
Company and its ability to produce a commercially viable product.
Early Stage of the Company and Its Products; Technological Uncertainty.
No revenues have been generated by the Company to date from the sale of
its only product, PHER-O2. The potential to achieve sustained profitable
operations is subject to the Company's ability to successfully develop, obtain
regulatory approval for, manufacture and market this product. No tests of any
nature have yet been conducted on PHER-O2. Furthermore, the time involved to
achieve regulatory approval and market success is long and uncertain. This
product will require extensive preclinical and clinical testing, before the
Company will be able to obtain FDA approval for any use, if at all. There can
be no assurance that this product will prove to be safe or effective in any
testing or trials conducted; that FDA approval for this product will be
obtained; that this product can be manufactured at a cost that would make it a
commercially viable product; or that this product, if and when it receives any
such approval, can be successfully marketed.
Future Capital Requirements; Uncertainty of Future Funding
The Company presently has limited operating capital. It has estimated
its future funding needs to construct its proposed manufacturing facility and
develop its product through the anticipated FDA and comparable foreign agency
approval at approximately $29,000,000. The Company will need to raise these
funds through equity or debt financings, which will be very difficult for such
a highly speculative enterprise. There can be no assurance that such
additional funding will be made available to the Company, or if made
available, that the terms thereof will be satisfactory to the Company. The
availability of such funding will also cause substantial dilution to existing
stockholders. If such funding is not made available to the Company, it is
doubtful that the Company will be able to conduct its planned business
operations; and the proceeds of this Offering, if this Offering is a success,
constitute only a small portion of the funding required and will not assure
the future of the Company to any degree.
Governmental Regulation and Product Approval
The Company's preclinical and clinical trials, manufacturing and
marketing of its proposed product are subject to extensive regulation by
numerous governmental authorities in the United States and foreign countries.
All trials, manufacturing and marketing of this product will be subject to the
rigorous testing and approval processes of the FDA and corresponding foreign
regulatory bodies. Further, each clinical trial must be conducted under the
auspices of an Independent Review Board ("IRB"), which will consider, among
other factors, ethical considerations, the safety of human subjects and the
possible liability of the institution. The regulatory process, which includes
pre-clinical, clinical and post-clinical testing of the product to establish
its safety and efficacy, can take many years and require the expenditure of
substantial resources. Data obtained from these trials is always subject to
varying interpretations, all of which can extend the process, or limit or deny
approval. Regulations often change during the approval process, and such
changes can cause further delay and additional expense, and may prohibit
approval. Similar problems may also be encountered in foreign countries.
There can be no assurance that even after such time and expenditures that
regulatory approval will be obtained, and if it is obtained, that the product
can be commercially and economically marketed. Even if such approval is
obtained, the Company and its product and facilities are subject to continual
review and periodic inspections, and the subsequent discovery of previously
unknown problems with the product, the manufacturer or facilities may result
in further restrictions on the product or the manufacturer, and may include
withdrawal of the product from the market. Failure to adhere to the stringent
governmental regulations may also subject the Company to fines, suspensions of
regulatory approval, product recalls, operating restrictions and criminal
prosecution of its principals. See the caption "Governmental Approval of
Principal Products or Services" of this Memorandum.
Patent Applications and Proprietary Rights
A patent application has been filed on the Company's only product, and
patent pending status has been granted to the Company; however, no assurance
can be given that a patent will actually be issued by the United States Patent
Office or any foreign country. Further, the patent position of entities such
as the Company generally is highly uncertain and involves complex legal and
factual questions. To date, no consistent policy has emerged regarding the
breadth of claims allowed in biotechnology patents. Accordingly, there can be
no assurance that the patent pending relating to the Company's product will
result in a patent being issued or that if issued, the patent will afford
protection against competitors with similar technology or those who develop
similar technology. See the caption "Patents, Trademarks, Licenses,
Franchises, Concessions, Royalty Agreements or Labor Contracts" of this
Memorandum.
Competition
PHER-O2, if approved for use by the FDA or any corresponding foreign
bodies, will compete directly with established therapies for blood loss.
Patients whose oxygen-carrying ability has been significantly depleted by
blood loss frequently receive transfusions of red blood cells, while patients
who have suffered more moderate blood loss can be treated with various
intravenous solutions, such as saline or human serum albumin, which replace
the volume of blood lost, but not its oxygen carrying capacity. There is no
assurance that even if the FDA or any corresponding body approves this product
for use, that it will have any significant advantages over such other products
to cause the medical profession to adopt it rather than continue to use
established therapies. The Company will also be competing with numerous other
companies, research foundations and institutions seeking to develop synthetic
blood products, most all of which will have substantially greater resources,
personnel and facilities than the Company possesses, even if the Company is
successful in raising required capital to fund its proposed business
operations, as to which no assurance can be given. See the caption
"Competition" of this Memorandum.
Dependence on Key Personnel
Thomas C. Drees, Ph.D, M.B.A., the Company's President and Chief
Executive Officer, is the inventor of PHER-O2, and served as the President and
CEO of Alpha Therapeutics Corporation, a subsidiary of Green Cross Corporation
of Japan, the developer of Fluosol DA 20, the only FDA-approved synthetic
blood product to date. He has also written a book on this subject, Blood
Plasma: The Promise and the Politics, Ashley Books, New York, 1983. Dr.
Drees is 71 years of age and in good health; however, the retirement,
disability or death of Dr. Drees would have a significant adverse impact on
the Company's proposed business operations. Anthony G. Hargreaves, who is the
Vice President and Secretary/Treasurer, has significant background in the
medical field, including service as General Manager of VK Limited of Pasadena,
California, where he was instrumental in securing funding for a wearable,
continuously-operating artificial kidney machine. Mr. Hargreaves has been
with Sanguine California since its inception, and his retirement, disability
or death could also have an adverse impact on the Company. See the caption
"Directors, Executive Officers, Promoters and Control Persons" of this
Memorandum.
Product Liability and Insurance
The use of PHER-O2, if regulatory approval is received, along with the
manufacture and marketing of this product, may expose the Company to liability
claims which could have a material adverse effect on the Company. These
claims may be made by the customers of the product or by others selling the
product. It is anticipated that PHER-O2 will be given in large doses, and
accordingly, it must be rigorously purified because impurities may lead to
serious and potentially fatal toxic reactions. The Company intends to seek
limited product liability insurance, subject to available funding, prior to
commencing human clinical trials; however, such coverage is expensive, and no
assurance can be given that the Company will be able to obtain such insurance,
or if obtainable, that such insurance can be acquired at a reasonable cost or
in sufficient amounts to protect the Company against losses due to liability.
An inability to obtain insurance at an acceptable cost or to otherwise protect
against potential product liability could prevent or inhibit the
commercialization of this product. In addition, a product liability claim or
recall could have a material adverse effect on the business or financial
condition of the Company.
Absence of Public Market; Instability of Stock Price
The Company's Common Stock commenced to trade on the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD") in the second quarter of 1994; however, there is no "established
trading market" in these shares of Common Stock. If an established trading
market for the Company's Common Stock does develop in the future, there can be
no assurance that it will continue or be maintained. Any market price for
shares of Common Stock of the Company is likely to be very volatile, like that
of many other biotechnological companies, and factors such as results of
clinical trials of the Company or its competitors, other evidence of safety or
efficacy of the Company's product, announcements of new commercial therapeutic
products by the Company or its competitors, governmental regulation,
developments in patents or proprietary rights by the Company or its
competitors and fluctuations in operating results may all have a significant
effect. In addition, the stock markets generally have experienced and
continue to experience extreme price and volume fluctuations which have
affected the market price of many biotechnological companies and which have
often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic and political
conditions, may adversely affect the market price of the Company's Common
Stock.
Shares Eligible for Future Sale
Present members of management, Karl Smith, A. Smith Associates and
A.K.S, Inc. (both of which are majority-owned by Mr. Smith) currently
beneficially own 126,000 shares of the Common Stock of the Company or
approximately .005% of its outstanding voting securities. All of the Common
Stock owned by Dr. Drees and Mr. Hargreaves will have been beneficially owned
for two years, and subject to compliance with the applicable provisions of
Rule 144 of the Securities and Exchange Commission, each of these persons may
then commence to sell up to 1% of the outstanding securities of the Company in
any three month period. Such sales could have a substantial adverse effect on
any public market that may then exist in the Company's Common Stock. Further,
126,000 of the shares of Common Stock beneficially owned by A. Smith
Associates, A.K.S, Inc. and Mr. Smith are presently eligible to be sold in the
open market, having been acquired in private transactions. Sales of any of
these shares by A. Smith Associates, A.K.S, Inc. or Mr. Smith may further
depress the thinly traded market for shares of Common Stock of the Company.
Sales of any of these shares by Dr. Drees, Mr. Hargreaves, A. Smith
Associates, A.K.S, Inc. and Mr. Smith could severely affect the ability of the
Company to secure the required debt or equity funding for the Company's
proposed business operations. In addition, the Company has recently
registered 1,350,000 for public distribution. See "Recent Developments." For
additional information concerning the present market for shares of Common
Stock of the Company, see the caption "Market Price of and Dividends on the
Company's Common Equity and Other Stockholder Matters" of this Memorandum.
For information regarding Common Stock or option ownership of these persons,
see the caption "Security Ownership of Certain Beneficial Owners and
Management" of this Memorandum.
Voting Control
Taking into account options to acquire shares of the Company's Common
Stock, which are held by others, Dr. Thomas C. Drees, its President/CEO and
Chairman of the Board of Directors, owns approximately 52.7% of the Company's
outstanding Common Stock. He therefore has the ability to elect all of the
Company's directors, who in turn elect all executive officers, without regard
to the votes of other stockholders. Dr. Drees may be deemed to have absolute
control over the management and affairs of the Company. See the caption
"Security Ownership of Certain Beneficial Owners and Management" of this
Memorandum.
Management Has Broad Discretion to Use the Proceeds of the Offering
Following this Offering, our management will have significant discretion
over the manner in which the proceeds of this Offering will be used to fund
operating expenses. There can be no assurance that management will profitably
use or invest the proceeds available to it. Unprofitable investment could
have a material adverse effect on our business.
Arbitrary Offering Price; The Offering Price May Not Reflect Actual Value
The Offering Price per Unit has been arbitrarily determined by the
Company and the Placement Agent and may not be related to the Company's asset
value, net worth, book value, the market price of the Company's Common Stock
or any other established criteria of value. The Offering Price should not,
however, be considered an indication of the actual value of the Company or our
securities. The Offering Price does not bear any relationship to the assets,
net worth, results of operations, or other objective criteria of value
applicable to the Company. Moreover, the Offering Price should not be viewed
as an indication of the future value of the Units or of the securities which
comprise the Units. Accordingly, there can be no assurance that such shares
or warrants can ever be resold at the Offering Price, if at all.
The foregoing risk factors do not purport to be a complete explanation
of all the risks involved in this Offering. You should read this entire
Memorandum and the reports attached before determining whether to invest in
the Company and you should consult your own legal, tax, and financial advisors
with respect to any investment in the Company.
USE OF PROCEEDS
The Units are being offered on a "best efforts, all or none" basis as to
the Minimum Offering of 4,000,000 Units ($2,000,000) and on a "best efforts"
basis as to the remaining 6,000,000 Units ($3,000,000). If the Minimum
Offering is consummated, the Company will receive net proceeds of
approximately 1,750,000. If the Maximum Offering is consummated, the Company
will receive net proceeds of approximately $4,450,000.
Minimum Percentage of Maximum Percentage of
Offering Net Proceeds Offering Net Proceeds
Research and
Development, FDA
Animal Trials $1,080,000 61.7% $3,130,000 70.3%
Marketing and
Promotion 50,000 2.8% 50,000 1.2%
Website Development 50,000 2.8% 50,000 1.2%
Working Capital (1) 570,000 32.7% 1,220,000 27.3%
Total $1,750,000 100% $4,450,000 100%
(1) Working capital includes payment of salaries for officers of the Company,
costs of possible joint ventures and/or strategic alliances, certain
outstanding debt, the costs of its anticipated Registration Statement filing
(see "Summary - Registration Rights") and other costs incurred in furtherance
of the Company's business objectives. The Company may also use approximately
$92,000 to repay a short-term loan obtained for working capital in the event
the loan is not converted to Common Stock (See "Recent Developments").
Once subscriptions for the Minimum Offering are received and accepted by
the Company, a closing will be held and the proceeds thereof will be made
available for use by the Company immediately. If the Minimum Offering is not
raised, all subscriptions will be returned without interest or deduction.
Receipt of an insufficient number of subscriptions by the Company may impact
on the Company's business plan. Management will have broad discretion in the
application of the proceeds of the Offering. It is currently anticipated,
however, that the Company will use the net proceeds of the Offering for
operating expenses, including web site development and equipment costs,
marketing costs, research and development, FDA animal trials and obligations
already incurred to third party contractors and consultants.
To the extent that the net proceeds of the Offering are not utilized
immediately, they will be held in deposit form, or invested in short-term
certificates of deposit, interest bearing deposits, short-term obligations of
the United States of America or prime commercial paper.
CAPITALIZATION
The following table sets forth the Company's capitalization at March 31,
2000, and as adjusted to give effect to the consummation of the Minimum and
Maximum Offering and the receipt of the estimated net proceeds therefrom.
Actual As Adjusted for Sale of
Minimum Offering Maximum Offering
Stockholders Equity:
Common Stock,
$.001 par value,
100,000,000 shares
authorized;
24,559,323 issued
and outstanding. $ 24,559 $ 28,559 $ 34,559
Paid in Capital 1,227,447 1,877,447 5,677,447
Accumulated deficit (2,065,671) (2,065,671) (2,065,671)
Total stockholders'
equity (813,665) (159,665) 3,646,335
Total Capitalization 1,252,006 1,906,006 5,712,006
DESCRIPTION OF SECURITIES
The Company is authorized to issue 100,000,000 shares of Common Stock,
par value $.001 per share. As of the date hereof, there were 24,559,323 shares
of Common Stock issued and outstanding.
Common Stock
Subject to the rights of the holders of any shares of Preferred Stock
which may be issued in the future, holders of shares of Common Stock of the
Company are entitled to cast one vote for each share held at all stockholders'
meetings for all purposes, including the election of directors. Directors are
elected each year at the Company's annual meeting of stockholders to serve for
a period of one year and until their respective successors have been duly
elected and qualified.
Common stockholders have the right to share ratably in such dividends on
shares of Common Stock as may be declared by the Board of Directors out of
funds legally available therefor. Upon liquidation or dissolution, each
outstanding share of Common Stock will be entitled to share equally in the
assets of the Company legally available for distribution to stockholders after
the payment of all debts and other liabilities.
Common stockholders have no pre-emptive rights. There are no conversion
or redemption privileges or sinking fund provisions with respect to the Common
Stock. All of the outstanding shares of Common Stock are, and all of the
shares of Common Stock offered hereby will be, validly issued, fully paid and
nonassessable. The Common Stock does not have cumulative voting rights so
holders of more than 50% of the outstanding Common Stock can elect 100% of the
Directors of the Company if they choose to do so.
Warrants
The following discussion is subject to the terms and conditions of the
Warrants, a copy of which is annexed hereto as Exhibit D and subscribers are
referred to the Warrant for more detailed information.
Terms. Each Warrant entitles the holder to purchase one share of Common
Stock during an exercise period commencing on the date of issuance and
terminating on the last business day of the forty-eighth month following the
Initial Closing Date, at an exercise price equal to $.40 per share, subject to
adjustment in certain circumstances. The Warrants may be exercised in whole or
in part. Unless exercised, the Warrants will automatically expire on the last
business day of the forty-eighth month following the Initial Closing Date.
Registration Rights. The Company has agreed to register for resale under
the Securities Act, the Warrants, Shares and Warrant Shares in a Registration
Statement to be filed by the Company 30 days after the final closing of this
Offering, and to cause the Registration Statement to become effective within
150 days after the final closing of this offering. In the event that the
Company fails either to (i) cause the Registration Statement to be filed under
the Act 30 days after the Final Closing, or (ii) cause the Registration to
become effective 150 days after the final closing, then the exercise price of
the Warrants shall be reduced at the rate of $.05 for every 30 day delay, or
part thereof, in the effectiveness of the Registration Statement, but in no
event shall the exercise price be reduced less than $.001 per share. The
Company shall keep the Registration Statement current and effective until 30
days after the termination of the exercise period of the Warrants.
In connection with the registration process, the Company is required only
to use its best efforts to cause the Shares and the Warrant Shares covered by
the registration statement to be registered or otherwise qualified for sale in
the states designated by the Holders. It may in fact not be practicable to
qualify these securities for sale in every state in which Holders of the
Shares and the Warrants Shares reside. Accordingly, it is possible that the
substantial restrictions on the transferability of the Shares and Warrant
Shares will continue, even after registration.
Redemption. Commencing one year after issuance, the Warrants are
redeemable, in whole or in part, at the option of the Company, for $.05 per
Warrant on not less than thirty days prior written notice, provided that (i)
the closing bid price of the Company's Common Stock is at least 200% of the
then current exercise price; and the trading volume of the Common Stock is not
less than 50,000 shares per day, on each of the 20 consecutive trading days
ending within 10 days of the date of the notice of redemption; and (ii) the
Warrant Shares have been registered for public distribution under the
Securities Act.
Transfer Agent
The transfer agent for the Company's Common Stock is Colonial Stock
Transfer Company, Inc., 455 E. 400 South, Suite 100, Salt Lake City, Utah
84111.
PLAN OF DISTRIBUTION
Laidlaw Global Securities, Inc., the Placement Agent, has agreed,
subject to the terms and conditions contained in the Agency Agreement between
the Company and the Placement Agent, to act as the Placement Agent for the
sale by the Company of 4,000,000 Units, on a "best efforts, all-or-none" basis
and an additional 6,000,000 Units on a best efforts basis. The Offering shall
commence on the date hereof and terminate on July 30, 2000, unless extended
for an additional 30 days by the Company and the Placement Agent (the
"Expiration Date"). The Company and the Placement Agent may increase the
maximum number of Units offered to 11,000,000 Units.
The Placement Agent will receive a commission equal to 8% of the
aggregate purchase price of the Units sold ($160,000 if the minimum number of
Units are sold and $400,000 if the maximum number are sold). In addition, the
Company shall pay the Placement Agent a non-accountable expense of 2% of the
gross proceeds of the Offering and reimburse the Placement Agent for expenses
incurred.
The amount of such commissions and non-accountable expense allowance will
increase proportionally in the event the maximum number of Units offered
hereby is increased.
Concurrent with, and as a condition precedent to, the closing of the
Offering, the Company shall sell to the Placement Agent (or its designated
affiliates) warrants (the "Agent Warrants"), at a price of $.001 per warrant,
to purchase 10% of the Units sold in the Offering. Such Agent's Warrants will
expire two years after the completion of this Offering. The Agent Warrants
will be exercisable at $.001 per Unit. The Agent Warrants may be exercised as
to all or a lesser number of Units and will contain provisions for
registration of the resale of the underlying Common Stock at the Company's
expense, cashless exercise and for adjustment in the number of such shares and
the exercise price to prevent dilution.
The Offering Price per Unit has been arbitrarily determined by the
Company and the Placement Agent and may not be related to the Company's asset
value, net worth, book value, the market price of the Company's Common Stock
or any other established criteria of value.
The Company also has agreed to indemnify the Placement Agent against
certain liabilities in connection with the Offering under the Act.
Investor Suitability
Sales of the Units will be made only to "accredited investors," as such
term is defined in rule 501 of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Act"). Generally, to be an "accredited
investor," an investor who is a natural person must, at the time of his
purchase, (I) have a net worth, individually or jointly with one's spouse, in
excess of $1,000,000 or (II) have had an individual income in excess of
$200,000 in each of the two most recent years, or joint income with one's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year. An
organization or entity subscribing for Units also may qualify as an
"accredited investor" if it is (U) a bank as defined in Section 3(a)(2) of the
Act or a savings and loan association or other institution defined in Section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity;
a broker-dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); an insurance company as defined
in Section 2(13) of the Act; an investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed
by the U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality thereof,
for the benefit of its employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 ("ERISA"), if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000, or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors, (V) a private business
development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940, (W) an organization described in Section 503(c) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust
or partnership, not formed for the specific purpose of acquiring Units, with
total assets in excess of $5,000,000, (X) a director or officer of the
Company, (Y) a trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring Units, whose purchase is directed by a
sophisticated person and described in Rule 506(b)(2)(ii) of the Act or (Z) an
entity all of the equity owners of which are accredited investors, all as
defined in Regulation D.
Subscription Agreement and Procedures
All subscriptions must be made by the execution and delivery of a
Subscription Agreement in the form attached to this Memorandum. By executing
the Subscription Agreement, each purchaser will represent, among other things,
that (a) he is acquiring the Units being purchased by him for his own account,
for investment purposes and not with a view towards resale or distribution and
(b) immediately prior to his purchase, such purchaser satisfies the
eligibility requirements set forth in this Memorandum. See "Investor
Suitability" above. Notwithstanding the foregoing representations, the
Company has the right to revoke the offer made herein and to refuse to sell
Units to a particular subscriber if the subscriber does not promptly supply
all information requested by the Company or the Company disapproves the sale.
In addition, since each purchaser will be subject to certain restrictions
on the sale, transfer or disposition of his Units as contained in the
Subscription Agreement and because there is only a limited market for the
Units, a purchaser must be prepared to bear the economic risk of an investment
in the Units for an indefinite period of time. An investor in the Units,
pursuant to the Subscription Agreement and applicable law, will not be
permitted to transfer or dispose of the Units, unless they are registered or
unless such transaction is exempt from registration under the Act and other
applicable securities laws and in the case of a purportedly exempt sale, such
investor provides (at his own expense) an opinion of counsel reasonably
satisfactory to the Company that such exemption is, in fact, available.
Certificates representing the Notes and Common Stock comprising the Units will
bear a legend relating to such restrictions on transfer.
Subscriptions are not binding on the Company until accepted by the
Company. The Company will refuse any subscription by giving written notice to
the Subscriber by personal delivery or first-class mail. In its sole
discretion, the Company may establish a limit on the purchase of Units by a
particular purchaser.
In order to subscribe for the Units, a prospective investor must deliver
the following documents to the Placement Agent:
1. One completed and duly executed copy of the Subscription Agreement
(included in the Subscription Documents delivered with this Memorandum) with
signatures properly acknowledged;
2. A check payable to "Pershing - Sanguine Special Account" in the full
amount of the subscription price for the Units subscribed.
Special Account
All funds received on account of the sale of the Units will be placed in
an non-interest-bearing special account entitled "Sanguine Special Account"
with Donaldson, Lufkin & Jenrette Securities Corp., Pershing Division, New
York, New York. Pershing will hold all of the proceeds from the Offering
until subscriptions for 4,000,000 Units have been received and accepted and it
receives notice from the Company of this fact. Upon receipt of such notice, a
closing will be held and Pershing will release the subscription funds to the
Company. If proceeds from the Offering are not received prior to the
Expiration Date, all subscription funds received will be returned by Pershing
to investors, without interest thereon, as soon as practicable thereafter.
Assuming the minimum number of Units is subscribed for and accepted and a
closing held, thereafter additional subscription funds will be placed into the
special account and additional closings will be held from time to time up to
the sale of an additional 6,000,000 Units. Once the Maximum Offering Amount
has been subscribed for and accepted by the Company, a final closing will be
held.
INVESTOR QUALIFICATIONS
The liquidity and significant risks associated with an investment in the
Company make the purchase of Units suitable only for investors who have
substantial net worth, who have no need for liquidity with respect to any
investment in the Company, who can bear the risk of a complete loss of the
investment, who understand and appreciate the nature of the risks involved
with such an investment and have reviewed all of the same with his tax, legal
and investment advisors, and who have adequate means for providing for current
foreseeable needs and personal contingencies.
Only when the Company is reasonably satisfied with the answers contained
in the Confidential Prospective Investor Questionnaire section of the
Subscription Agreement, which will be relied upon by the Company, and the
Company concludes that a prospective investor meets the suitability and
sophistication tests described in this Memorandum will a subscription of a
prospective investor be accepted.
Prior to the purchase of any Units, each prospective investor will be
required to complete and submit to the Company a Subscription Agreement in the
form annexed to this Memorandum as Exhibit "B". Those prospective investors
using an investor representative must have their investor representative
complete and submit an investor representative questionnaire which will be
issued by the Company upon request. Each prospective investor will be
required to represent that: (a) his commitment to all investments is
reasonable in relation to his net worth; (b) he has the requisite knowledge or
has relied upon the advice of his own counsel, accountants or others, each of
whom qualifies as an Investor Representative with regard to all of the
considerations involved in making this investment; (c) he will be acquiring
the Units for investment and not with a view to resale or distribution of the
Units or the Shares or Warrants included therein; (d) he is aware that the
right to transfer the Units as well as the securities underlying the Units is
restricted as set forth herein; (e) he has the financial ability to bear the
economic risk of the investment in the Company (including the complete loss of
the entire investment), adequate means of providing for his current and
anticipated needs and personal contingencies, and no need for liquidity with
respect to his investment in the Company; (f) his overall commitment to
investments which are not readily marketable is not disproportionate to his
net worth and his investment in Units will not cause such overall commitment
to become excessive; and (g) that he qualifies as an "accredited investor" as
defined in Regulation D promulgated under the Securities Act. These
suitability standards shall apply unless state law in the state in which the
Offering is being made provides otherwise.
In the event any Units are purchased by a person or an entity in a
fiduciary capacity for any other person (or for an entity in which such person
is deemed to be a "purchaser" or "investor" of the subject Units), the
suitability standards set forth above shall be applicable to such other
person(s) or entity(ies).
Whether or not a prospective investor meets the suitability standards set
forth above, the Company and the Placement Agent reserve the right, in either
of their sole discretion, to reject any subscription, in whole or in part. If
any information furnished or representations made by a prospective investor or
others acting on his or its behalf mislead the Company or the Placement Agent
in soliciting subscriptions for the Units, as to the financial or other
circumstances of such investor, or if, because of any error or
misunderstanding as to such circumstances, a copy of this Memorandum is
delivered to a prospective investor who does not meet the suitability
standards set forth above, the delivery of this Memorandum to such prospective
investor shall not be deemed to be an offer, and this Memorandum must be
returned to the Company immediately.
THE SUITABILITY STANDARDS DISCUSSED ABOVE REPRESENT MINIMUM SUITABILITY
STANDARDS FOR PROSPECTIVE INVESTORS. EACH PROSPECTIVE INVESTOR SHOULD
DETERMINE, AFTER CONSULTING WITH HIS TAX, LEGAL AND INVESTMENT ADVISORS,
WHETHER AN INVESTMENT IN THE COMPANY IS APPROPRIATE IN HIS PARTICULAR
CIRCUMSTANCES.
A BREACH BY AN INVESTOR OF ANY OF HIS REPRESENTATIONS MADE TO THE COMPANY
WHICH RESULTS IN A LOSS BY THE COMPANY OF THE EXEMPTION FROM REGISTRATION
AFFORDED BY REGULATION D OR OTHER EXEMPTION BEING RELIED UPON, OR OTHER
DAMAGES, MONETARY AND OTHERWISE, WILL CAUSE SUCH INVESTOR TO BE LIABLE TO THE
COMPANY FOR ALL DAMAGES AND LOSSES PROXIMATELY CAUSED BY SUCH BREACH.
Access to Additional Information
Each prospective investor will be afforded the opportunity to obtain any
additional information reasonably requested and to ask questions of, and
receive answers from, Dr. Thomas Drees, 101 East Green Street, #11, Pasadena,
California 91105, telephone number (626) 405-0079, or such other persons as
may be designated by the Company, concerning the terms and conditions of the
transaction, the information set forth herein and any additional information
that is requested and supplied to such prospective investor. Complete access
to all agreements and other documents relating to the Company and its business
will be given to each prospective investor upon request to Dr. Drees. In
addition, prospective investors are invited to review the Company's public
reports and filings in the EDGAR section of the Securities and Exchange
Commission's website: http://www.sec.gov.
Exhibit A
Form 10-KSB
Exhibit B
Subscription Agreement
Exhibit C
Form of Investor Questionnaire
Exhibit D
Form of Warrant