U. S. Securities and Exchange Commission
                     Washington, D. C.  20549

                           FORM 10-KSB

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

     For the fiscal year ended December 31, 2005

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

     For the transition period from _____________ to ____________

                   Commission File No. 000-24480

                       SANGUINE CORPORATION
                       --------------------
          (Name of Small Business Issuer in its Charter)

            NEVADA                                    95-4347608
            ------                                    ----------
(State or Other Jurisdiction of                (I.R.S. Employer I.D. No.)
 incorporation or organization)

                     101 East Green Street, #6
                    Pasadena, California  91105
                    ---------------------------
             (Address of Principal Executive Offices)

            Issuer's Telephone Number:  (626) 405-0079
            --------------------------

                               N/A
                               ---
  (Former Name or Former Address, if changed since last Report)

Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered:                     None
Securities Registered under Section 12(g) of the Exchange Act:

                    $0.001 par value common stock

     Check whether the Registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.  [ ]

     Check whether the Registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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.

     (1)   Yes  X     No            (2)   Yes  X    No
               ---       ---                  ---      ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.  [ ]

     Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).  Yes    No  X


     State the Registrant's revenues for its most recent fiscal year: December
31, 2005 - $1,019.

     State the aggregate market value of the voting stock of the Registrant
held by non-affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a specified
date within the past 60 days: March 20, 2006 - $5,551,172.34.  There are
approximately 39,651,231 shares of common voting stock of the Registrant
beneficially owned by non-affiliates.  This valuation is based upon the bid
price of our common as quoted on the OTCBB of the National Association of
Securities Dealers, Inc. on that date ($0.14).

                Issuers Involved in Bankruptcy Proceedings
                        During the past Five Years

     Not Applicable.

                   Applicable Only to Corporate Issuers

     State the number of shares outstanding of each of the Registrant's
classes of common equity, as of the latest practicable date: March 16, 2006 -
80,708,658 shares of common stock.

                    Documents Incorporated by Reference

     See Part III, Item I.


Transitional Small Business Issuer Format:   Yes  X   No
------------------------------------------       --- ----

<PAGE>
                              PART I

Item 1.  Description of Business.
         ------------------------

Business Development.
---------------------

     Developmental Information for the Year Ended December 31, 2004.
     ---------------------------------------------------------------

     We completed the restructuring of our financial statements that involved
the satisfaction of debt for common stock issuance, issuance of common stock
for certain convertible debt and the contribution to capital of other debt,
including accrued salaries of management and others.  See our 8-K Current
Report dated September 29, 2004, that was filed with the Securities and
Exchange Commission on October 7, 2004, and which is incorporated herein by
reference.  See Part III, Item 13.

     The testing of our red blood cell substitute product, PHER-02, in various
phases of animal toxicity trials, was begun.  The universities of Chicago,
Maryland and the University of Alberta (Canada) medical schools conducted
testing that focused on its effectiveness in perfusion for pancreas
preservation for transplantation.

     PHER-02 is still  being used to develop for the U.S. Navy submarine crew
and deep sea diving oxygenation treatment of the bends.

     We continue to confer with the U.S. Army Medical Corps to develop a
"golden hour" medical kit using PHER-02 to allow self blood transfusion on the
battlefield.

     We successfully completed animal toxicity and efficacy trials at the
University of Alberta (Canada) respecting transporting of pancreas islet
cells.  See our 8-K Current Report dated November 17, 2004, that was filed
with the Securities and Exchange Commission on November 18, 2004, and which is
incorporated herein by reference.  See Part III, Item 13.

     For information about additional developments during 2004, see our 10-KSB
Annual Report for the calendar year ended December 31, 2004, that was filed
with the Securities and Exchange Commission on May 6, 2005, and which is
incorporated herein by reference.  See Part III, Item 13.

     Developmental Information for the Year Ended December 31, 2005.
     ---------------------------------------------------------------

     We convened our Medical Advisory and Applications Board in California on
April 2, 2005, to discuss our final selection of a contract research
organization to initiate and conduct our animal testing for the FDA approval
process and to select a PHER-02 manufacturer.  Beckloff Associates, Inc., a
Cardinal Health company of Overland Park, Kansas ("Beckloff"), has been
selected by us to analyze our IND (indication of what approvals are being
sought) submissions, NDA (new drug) applications, ANDA (appended new drug)
applications, IDE(investigational device evaluation) submissions, PMA (pre-
market approval) applications and 510(k) (form for medical devices)
applications, among other requirements, and to comment on the organization and
accuracy of our scientific data that is presented, along with advising us on
the attitudes, approaches and requirements of the FDA.

     Developmental Information Subsequent to the Year Ended December 31, 2005.
     -------------------------------------------------------------------------

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

     In March, 2006, our Board of Directors resolved to offer for sale in a
private placement 20,000,000 shares of our common stock that are "restricted
securities" as defined in Rule 144 of the Securities and Exchange Commission
for $0.07 per share to "accredited investors" only, as that term is defined in
Rule 501 of Regulation D.  The anticipated aggregate gross proceeds of
$1,400,000 will be utilized by us to fund the FDA required animal studies of
our synthetic red cell blood product, PHER-02, for use in the transportation
of pancreas islet cells in the treatment of diabetes and for other purposes.
We are in the process of preparing the necessary documentation to commence
this offering.  No assurance can be given that we will be successful in
raising these funds; and if we are unable to complete this funding, our
continuing process to obtain FDA approval for the use of our product will be
severely reduced and delayed.

Business.
---------

     We are engaged in the development of a synthetic red blood cell product
called "PHER-O2."  The development of this product presently comprises our
sole business operations.  PHER-O2 is composed of perfluoro-decalin molecules,
or synthetic red blood cells, purified water and a proprietary, synthetic,
fluorinated surfactant, or wetting agent, to hold the emulsion together.
Perfluoro-decalin has great oxygen-carrying capacity, yet it can be as much as
25 times smaller than a red blood cell.  We believe that PHER-O2 can carry
three to four times the oxygen of human blood per unit volume. This increased
oxygen-carrying capacity would make PHER-O2 useful in the treatment of heart
attacks, strokes, cancer and other diseases for which increased oxygenation is
beneficial.  We also believe that perfluoro-decalin is effective as an imaging
agent in X-ray imaging, nuclear magnetic resonance imaging and CAT scans,
without side effects.  Our management estimates that PHER-O2 has several other
advantages over human blood: that it can be sterilized to be free of disease;
that it has the quality of a universal match for all blood types; that it can
be mass-produced; and that it can be stored at room temperature for up to
three and one half years, much longer than human blood, which can only be
stored at room temperature for about 42 days.

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

     *    continual animal testing at certain universities as outlined above
under the caption "Developmental Information for the Year Ended December 31,
2004;"

     *    beginning our project with the United States Army Medical Corps to
develop a "golden hour" medical kit using PHER-02.  The kit would allow self-
transfusion on the battlefield, thus helping to prevent bleeding to death
injuries, which are a major cause of fatalities in combat, despite current
improvements in front line battle care;

     *    developing a deep sea diving oxygenation treatment of the bends for
use by the U.S. Navy on submarine crews; and

     *    completing the animal toxicity and efficacy trials respecting
transporting of pancreas islet cells.

     In our third phase of operations, intended to commence during our second
quarter of 2006, we intend to continue developing the perfluorocarbon
compounds in PHER-O2 in order to optimize its quality; and begin animal safety
and efficacy trials in accordance with FDA guidelines and comparable foreign
regulatory requirements, with the aid and assistance of Beckloff, a Cardinal
Health company.

     In our final phase, we intend to:

     *    complete United States testing of PHER-O2;

     *    seek all necessary FDA approvals and begin American and Canadian
sales; and

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

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

     PHER-O2 has not submitted any application to any federal, state or
foreign agency to seek authority for animal or human testing.  The development
process will be time consuming and expensive.  It will also be subject to
extreme governmental regulation.  We will have to prove that our product is
safe and efficacious for human use.  Until then, we will have no potential for
revenues from operations except for licensing.  We cannot assure you that we
will be able to raise the money necessary to develop PHER-O2 or that, if we
raise sufficient funds, that we will ever receive the necessary federal, state
or foreign agency approval to manufacture or market the product.

Principal Products or Services and their Markets.
-------------------------------------------------

     We have one lead product, PHER-O2, and 15 extensions of that product.
Our success hinges largely on the success of this product.  We can not assure
you that it will ever be successful.  PHER-O2 is made up of perfluoro-decalin,
which is a type of perfluorocarbon that is harmless to humans and the
atmosphere and was used in the FDA approved first generation product, Fluosol,
purified water and a proprietary surfactant to hold the emulsion together.
Perfluoro-decalin gives our product its oxygen carrying ability.  The
surfactant is non-toxic and was FDA approved in Fluosol and, being
fluorinated, helps increase PHER-O2's oxygen carrying capacity and emulsion
stability.  We believe that the unique chemical nature of PHER-O2 will make it
ideal for many medical applications, although each application will be subject
to the same types of rigorous testing, clinical trials and governmental
regulatory approval process.

     We believe that PHER-O2 has the following advantages over human blood:

     *    may carry three to four times the oxygen of human blood per unit
volume;

     *    free of HIV, hepatitis B & C, Mad Cow and other blood-borne disease;

     *    universal match for all blood types;

     *    may be mass-produced;

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

     *    may be stored at room temperature;

     *    has controllable circulatory half-life; and

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

     PHER-O2 is a second generation improved drug from Fluosol-DA, the only
synthetic red blood cell approved by the FDA.  This approval was completed
under the management of our President and CEO, Thomas C. Drees, Ph.D.

     We believe that its unique qualities may make PHER-O2 ideal for blood
transfusions and numerous other medical applications, including:

     *     transportation of pancreas islets for treatment of diabetes;

     *     ophthalmic retinal surgery;

     *     angioplasty;

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

     *     Alzheimer's;

     *     oxygenation of cancerous tumors;

     *     nuclear magnetic resonance imaging;

     *     CAT scans;

     *     cardioplegia, or the priming of heart-lung machines in open heart
surgery; and

     *     treatment of heart attacks, strokes, head and neck tumors and
hemorrhagic shock.

     We intend to fully exploit the immense worldwide market for these
applications.

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

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

     Blood transfusion represents a vast market for synthetic red blood cells.
The limited supply of safe donated blood is the largest constraint on the
number of transfusions given annually.  If a safe blood substitute were widely
available, more transfusions could be given to those who desperately need
them.  The present market for transfusions worldwide is 100,000,000 units per
year, but that is only one-third of the annual demand.

    We hope to fulfill this need with PHER-O2. The key ingredients in PHER-O2
are readily available in the United States from many manufacturers.  When
combined, using our proprietary emulsion process, we know that the result will
be a plentiful alternative to donated human blood.

     Another disadvantage to the use of human blood in transfusions is
the waiting period while the donor's blood is being matched to the
recipient's.  Because we know that PHER-O2 does not need to be matched to
the recipient's blood type, the use of PHER-O2 would eliminate this
potentially fatal wait, and increase its use in ambulances, emergency rooms
and battle fields.

     As HIV, hepatitis B & C and other diseases have infected the world's
blood supply, the need for an absolutely sterile blood product has become
increasingly apparent.  There is currently no 100% effective method for
detecting blood-borne diseases and sterilization of donated blood is not
possible.  In light of these facts, PHER-O2's potential sterility makes it
especially attractive in comparison to donated blood with its risk of AIDS,
hepatitis and mad cow disease.

     PHER-O2's anticipated ability to carry up to four times the oxygen
of human blood makes it promising for many medical applications in which
increased oxygenation is vital.  PHER-O2 molecules are up to 25 times smaller
than human red blood cells.  Management believes that this fact will make
PHER-O2 particularly useful for oxygenating organs through blocked arteries,
which are the primary cause of heart attack and stroke.

     One of our former competitors had obtained in 1989 FDA approval under Dr
Drees' management for the use of a similar product in angioplasty, the
treatment of blocked arteries with small inflated balloons.  This application
involves the injection of the blood substitute into the artery past the
inflated balloon.  As a result, the heart receives more oxygen, the treating
physician can keep the balloon inflated longer and the angioplasty is more
effective than it would otherwise be.  This competitor announced in 1993 that
it would no longer manufacture its product, leaving us well positioned in this
market segment.  Fluosol was non-stable, so it had to be frozen, which made it
difficult to handle.

     Management also believes that PHER-O2 will be ideal for use in
open-heart surgery.  Cardiac surgeons need an oxygen-carrying fluid that can
be used to prime the heart-lung bypass machines that are used mechanically to
pump and oxygenate heart patients' blood.  This procedure is known as
"cardioplegia."  Surgeons currently use saline, dextrose or hydroxyethyl
starch solutions for this purpose, but these fluids can dilute the red blood
cells in the body, and thus decrease the ability of the blood to carry
oxygen.   Moreover, the risk of infection from whole blood or its derivatives
makes them undesirable for use as priming fluids.  PHER-O2's significant
oxygen-carrying ability and its sterility address both of these concerns.

     The treatment of head and neck tumors is another promising
application for PHER-O2.  Increased oxygenation of these tumors makes them
more susceptible to the effects of radiation and chemotherapeutic drugs, and
makes PHER-O2 a diagnostic for these types of tumors.

     Another potential benefit of PHER-O2, though little understood, is the
ability of oxygen-rich blood to cause a tumor to produce hydrogen peroxide,
which in turn tends to shrink the tumor.

     The perfluoro-decalin molecule in PHER-O2 also works as a radiopaque
agent in X-ray imaging and as a contrast agent in nuclear magnetic
resonance imaging and CAT scans.  However, unlike many currently-available
imaging agents, PHER-O2 has no known side effects.

Competition.
------------

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

     *     Biopure Corporation of Cambridge, Massachusetts;

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

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

     Each of these competitors files reports with the Securities and Exchange
Commission and these reports are available for review in the Securities and
Exchange Commission's EDGAR Archives.  These competitors are involved in the
development of a wide variety of human blood substitutes, including synthetic
compounds, recycled outdated human blood and bovine hemoglobin.  Neither the
list of competitors nor the list of human blood substitutes is exhaustive.
Furthermore, some of our existing or potential competitors have significantly
greater technical and financial resources than we do and may be better able to
develop, test, produce and market products.  These competitors may develop
products that are competitive with or better than our product and that may
render our product obsolete.  We can provide no assurance that we will be able
to compete successfully.  These four competitors have repeatedly failed FDA
tests.

Sources and Availability of Raw Materials.
------------------------------------------

     We plan to purchase highly purified medical-grade perfluorocarbons and
surfactants from reliable vendors and to emulsify these ingredients in our own
or other facilities, depending upon funding.  FluoroMed, LP, F2 Chemicals,
Ltd. and KC America are qualified medical grade perfluorocarbon vendors.
Surfactants are available through several U. S. vendors.  Because sterile
intravenous solutions manufacturing plants are very expensive and FDA approval
of these plants is a lengthy process, we intend to hire a third party to
package the product in sterile plastic bags with intravenous sets attached.
Abbott Laboratories, Baxter, B. Braun Medical Inc., Fresenius Kabi, and
Alliance Medical Products, Inc. are a few of the U. S. companies with the
qualifications and capacity to perform this function.  However, we can not
assure you that any of these ingredients or services will be available or that
they will be available at prices that are low enough to make our operations
profitable.

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

     We filed United States Application Patent Nos. 07/952/403 and 08/230/672,
covering PHER-O2, with the United States Patent Office on September 28, 1992
and April 21, 1994, respectively.  No patent has been issued, and we may have
to amend our patent application before any patent is issued, if ever.

     We filed European Application Patent No. (UK)EPO261802, covering PHER-O2,
with the European Patent Office on August 25, 1997.  No patent has been issued
and, and we may have to amend our patent application before any patent is
issued, if ever.

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

     We have a Consulting Agreement with Beckloff, a Cardinal Health company,
effective for one year commencing on March 25, 2005, whereby Beckloff will
assist us in implementing, conducting and completing our FDA testing and
approval process.

Governmental Approval of Principal Products or Services.
--------------------------------------------------------

     The FDA and comparable foreign agencies require laboratory testing,
animal and human clinical testing and other costly and time-consuming
procedures before biomedical products such as PHER-O2 can be marketed.  To
date, we have not begun any of these procedures.  Our plan for obtaining FDA
and overseas approval of PHER-O2 is set forth under the heading "Plan of
Operation" of the caption "Management's Discussion and Analysis or Plan of
Operation" in Part I, Item 6.

     We can not assure you that these testing procedures will be successfully
completed, that if completed, they will show PHER-O2 to be safe and
efficacious, or that we will obtain any required governmental approvals.  Nor
can we assure you that we will ever be permitted to market PHER-O2 in the
United States or most foreign countries.  The same holds true for any other
related products or proprietary rights that we may develop.

Effects of Existing or Probable Governmental Regulations.
---------------------------------------------------------

     Regulation by governmental authorities in the United States and
foreign countries will significantly affect our ability to manufacture and
market our product and to conduct our ongoing research and product development
activities.  Our lead product, PHER-O2, will require regulatory approval by
appropriate governmental agencies before it can be commercialized.  Human
therapeutic products are subject to rigorous pre-clinical and clinical testing
and other approval procedures by the FDA and similar health authorities in
foreign countries.  Various federal, state and foreign statutes also govern or
influence the manufacturing, safety, labeling, storage, record-keeping and
marketing of such products.  The process of obtaining these approvals is
costly and time consuming.  In addition, ongoing compliance with these
requirements can require the expenditure of substantial resources.  If we or
our collaborators or licensees fail to obtain or experience delay in obtaining
required regulatory approvals the marketing of our product and our ability to
derive product or royalty revenue would be severely limited.

     Pre-clinical testing is generally conducted in animal or in vitro
models to evaluate the potential efficacy and safety of a compound before it
is administered to humans.  The results of these studies are submitted to the
FDA as part of an Investigational New Drug application ("New Drug
Application"), which must be approved before human clinical testing can
begin.  Successful stability tests and some animal tests have been run on
PHER-O2.

     Clinical trials involve the administration of the investigational
new drug to healthy volunteers or to patients, under the supervision of a
qualified principal investigator.  Clinical trials are conducted in accordance
with certain standards under protocols that detail the objectives of the
study, the parameters to be used to monitor safety and the efficacy criteria
to be evaluated.  Each protocol must be submitted to the FDA as part of the
New Drug Application.  Further, each clinical study must be conducted under
the auspices of an independent investigational review board at the institution
where the study will be conducted.  Consideration will be given to ethical
factors, the safety of human subjects and the possible liability of the
institution, among other things.

     Clinical trials are typically conducted in three sequential phases, but
the phases may overlap.  In the first phase, the product is usually infused
into a limited number of human subjects and will be tested for safety or
adverse effects, dosage tolerance and pharmacokinetics, or clinical
pharmacology.  The second phase involves studies in a somewhat larger patient
population to identify possible adverse effects and safety risks and to begin
gathering preliminary efficacy data.  The third phase of trials is designed to
further evaluate clinical efficacy and to further test for safety within an
expanded patient population at geographically dispersed clinical study sites.
Although we believe that our product is substantially different from other
synthetic blood products, we may encounter problems in clinical trials which
will cause us to delay or suspend them.

     In the case of biologic products such as PHER-O2, the results of
pharmaceutical development and the pre-clinical and clinical testing are
submitted to the FDA in the form of a Product License Application.  This
application must be approved before commercial sales may begin.  We must also
file an Establishment License Application, which describes the manufacturing
process for the product and the facility at which the product will be
produced.  The FDA may respond to the filings by granting a license for the
manufacture of the product from a designated facility and the commercial sale
of the product.  It may also deny the applications if it finds that the
applications do not meet the criteria for regulatory approval, require
additional testing or information or require post-marketing testing and
surveillance to monitor the safety of the product if it does not believe that
the applications contains adequate evidence of the safety and efficacy of the
drug.  Despite the submission of this data, the FDA may ultimately
decide that the application does not satisfy its regulatory criteria for
approval.  The testing and approval process is likely to require substantial
time and effort.  We can not guarantee that approval will be granted for
our product or our proposed facilities on a timely basis, if at all.

    In addition to regulations enforced by the FDA, we may also be subject to
regulation under the Occupational Safety and Health Act; the Environmental
Protection Act; the Toxic Substances Control Act; the Resource Conservation
and Recovery Act; the Comprehensive Environmental Response, Compensation and
Liability Act; the National Environmental Policy Act; the Clean Air Act; the
Medical Waste Tracking Act; the federal Water Pollution Control Act; and other
present and potential federal, state, local and foreign regulations.

Cost and Effect of Compliance with Environmental Laws.
------------------------------------------------------

     Management believes that all of the substances making up PHER-O2 are
inert and non-toxic and that no toxic or hazardous materials will be
byproducts of the manufacturing process of PHER-O2.  PHER-O2 is totally
inert.  Accordingly, we do not believe that we will have any material
expenditures for compliance with environmental laws, rules or regulations.

Research and Development Expenses.
----------------------------------

     Since inception, we have expended a total of approximately $1,400,000 on
research and development.  During years ended December 31, 2005, and 2004,
research and development expense was approximately $6,500 and $15,000,
respectively.  None of these costs were borne by customers or others.

Number of Employees.
--------------------

     We presently have two employees, our Chairman, President and CEO,
Thomas C. Drees, Ph.D.; and our Chief Financial Officer, David E. Nelson.  Dr.
Drees is employed full time.  If we are able to commence initial FDA approved
animal testing and manufacturing of this product for these tests, we will need
additional employees.  We are presently unable to estimate the exact number of
employees that we may need for these services.

Item 2.  Description of Property.
         ------------------------

     We lease approximately 600 square feet of office space located at 101
East Green Street, Suite 6, Pasadena California, 91105, at a base rent of
$896 per month.  The lease is on a month to month basis.

Item 3.  Legal Proceedings.
         ------------------

     We are not a party to any pending legal proceeding.  To the knowledge of
our management, no federal, state or local governmental agency is presently
contemplating any proceeding against us.  No director, executive officer or
other person who may be deemed to be our "affiliate" or who is the owner of
record or beneficially of more than five percent of our common stock is a
party adverse to us or has a material interest adverse to us in any
proceeding.

Item 4.  Submission of Matters to a Vote of Security Holders.
         ----------------------------------------------------

     We filed a Definitive Information Statement with the Securities and
Exchange Commission on December 23, 2005, regarding the approval of an
increase in our authorized shares to 200,000,000 with a $0.001 par value.  The
holders of 41,057,427 shares of approximately 50.9% of our outstanding voting
securities executed written consents to adopt this increase in our
capitalization.  See Part III, Item 13 of this Annual Report.

                                  PART II


Item 5.  Market for Common Equity, Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities.
-----------------------------------------------

Market Information.
-------------------

     Our common stock commenced to trade on the "OTC Bulletin Board" of the
National Association of Securities Dealers, Inc. ("NASD") in the second
quarter of 1994 under the symbol "SGNC."

     The range of high and low bid quotations for our common stock during
each quarter of the year ended December 31, 2004, and December 31, 2005, is
presented below.  Prices are inter-dealer quotations as reported by the NASD
(or the NQB, LLC) and do not necessarily reflect transactions, retail markups,
mark downs or commissions.

                             STOCK QUOTATIONS*

                                                  BID

Quarter ended:                          High                Low
--------------                          ----                ---
March 31, 2004                          $.085               $.055

June 30, 2004                           $.095               $.065

September 30, 2004                      $.08                $.05

December 31, 2004                       $.49                $.055

March 31, 2005                          $.35                $.26

June 30, 2005                           $.29                $.145

September 30, 2005                      $.16                $.10

December 31, 2005                       $.17                $.095

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

Holders.
--------

     The number of record holders of our common stock as of March 20, 2006,
was approximately 557.

Dividends.
----------

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

Recent Sales of Restricted Securities; Use of Proceeds of Registered
Securities.
-----------

     Restricted Securities.
     ----------------------

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

                         Number of
Name                   Shares or Units         Date            Consideration
----                   ---------------         ----            -------------

Leonard W. Burningham  525,000                  01/2003-03/2003 Services
Esq. (3)

Jason Carter           100,000                  01/2003         Services
(4)

National Financial   1,063,369                  2/2003          Services
Communications Corp
(2)

Medical Advisory Board  37,500                  3/2003          Services
(1)

SCS, Inc.            1,000,000                  6/2003          Debt Ret.

Medical Advisory Board  37,500                  6/2003          Services
(1)

SCS, Inc.            1,000,000                  6/2003          Debt Ret.

Medical Advisory Board  37,500                  9/2003          Services
(1)

Leonard W. Burningham, 500,000                 10/2003          Services
Esq. (3)

Medical Advisory Board  37,500                 12/2003          Services
(1)

Leonard W. Burningham, 500,000                  9/2004          Services
Esq. (5)

Seven (7) persons
and/or entities (6)   2,800,000                 9/2004          Services

Nine (9) persons
and/or entities (7)     773,902                9/2004        Conversion of
                                                           Convertible Notes
Ascendiant Capital
Group LLC (8)           228,666                9/2004      Conversion of Debt

Thomas C. Drees,
Ph.D. (9)            31,604,000                9/2004      Conversion of Debt

Anthony & Audrey
Hargreaves Trust (10)   924,600                9/2004      Conversion of Debt

Richard H. Walker (8)   300,000               12/2004       Warrant Exercise

Jossef Kahlon (8)      700,000               12/2004        Warrant Exercise

Medical Advisory Board  150,000               12/2004            Services
(1)

Kelly Trimble (11)      163,691               12/2004       Warrant Exercise

Mark Sansom   (11)      163,690               12/2004       Warrant Exercise

Jason Douglas (11)      100,000               12/2004       Warrant Exercise

Max Sabour (11)         100,000               12/2004       Warrant Exercise

Todd Kinney (11)        100,000               12/2004       Warrant Exercise

Robert Kwun (1)         100,000               12/2004       Warrant Exercise

Leonard W. Burningham,  513,750               12/2004       Warrant Exercise
Esq. (11)

Branden Burningham,     350,000               12/2004       Warrant Exercise
Esq. (11)

Brad Burningham,        350,000               12/2004       Warrant Exercise
Esq. (11)

Leonard W. Burningham,  300,000               12/2004       Warrant Exercise
Esq. C/F (11)

Richard P. Stanton (8)   83,629               12/2004       Warrant Exercise

Leonard W. Burningham,   200,000               2005         Warrant Exercise
Esq.(11)

Joseph Trabacoone(11)   100,000                2005         Warrant Exercise

Todd Kinney(11)         100,000                2005         Warrant Exercise

William P. Archer(11)   100,000                2005         Warrant Exercise

Robert S. Howell(11)     46,627                2005         Warrant Exercise

SCS, Inc.(12)           160,000                2005         Warrant Exercise

Susan Johnston(11)      100,000                2005         Warrant Exercise

James R. Dunn(11)       100,000                2005         Warrant Exercise

Joseph Trabaccone(11)    90,000                2/2005       Warrant Exercise

Robert Kwun(1)          73,313                2/2005            Services

Medical Advisory Board   37,500                4/2005           Services
(1)

Robert Kwun(1)           50,000                4/2005            Services

Joseph Trabaccone(11)    83,314                4/2005       Warrant Exercise

Thomas C. Drees(1)       25,000                4/2005           Services

David E. Nelson(1)       25,000                4/2005           Services

Edward L. Kunkel(1)      25,000                4/2005           Services

Leonard W. Burningham,  200,000                5/2005       Warrant Exercise
Esq. (11)

Thomas C. Drees(1)       25,000               10/2005           Services

David E. Nelson(1)       25,000               10/2005            Services

Edward L. Kunkel(1)      25,000               10/2005           Services

Medical Advisory Board   75,000               10/2005           Services
(1)

Robert Kwun(1)          100,000               10/2005           Services

          (1)  Issued for service as a member of the Board of Directors or the
Medical Advisory Board.

          (2) Miscellaneous public relation or other services.

          (3) Legal Services.

          (4) Stock transfer services.

          (5) These shares were valued at $40,000.

          (6) These shares were valued at $242,034.11.

          (7) The Convertible Note executed in favor of Barbara R. Mittman on
March 19, 2002, in the amount of $3,750.00, together with accrued interest,
was converted to 97,102 shares of common stock of our Company.

          The Convertible Note executed in favor of First York Partners, Inc.
on March 15, 2002, in the amount of $25,000, together with accrued interest,
was converted by the holders thereof to 676,800 shares of common stock of our
Company.

         (8) The Letter Agreement executed in favor of Ascendiant Capital
Group, LLC ("Ascendiant"), pursuant to which Ascendiant loaned $12,000 to the
Company, together with accrued interest, was converted to 228,666 shares of
common stock of our Company; and for previously extending the term of the
Letter Agreement, an additional Common Stock Purchase Warrant was granted to
Ascendiant for the option to purchase 30,000 shares of common stock of our
Company that are "restricted securities" under Rule 144 of the Securities and
Exchange Commission.

          (9) Thomas C. Drees, Ph.D., MBA, our President, CEO and a Director
agreed to exchange $1,264,160 of debt owed to him by us for 31,604,000 shares
of our common stock that are "restricted securities" under Rule 144 of the
Securities and Exchange Commission; and Dr. Drees also agreed to contribute to
capital his accrued salary of $497,500 and interest on the debt owed to him by
our Company in the amount of $453,630, together with any interest on any of
these amounts since June 30, 2004.

          (10) The Anthony and Audrey Hargreaves Trust (the "Trust") agreed to
exchange $36,984 of debt owed by us to Mr. Hargreaves prior to his death for
924,600 shares of our common stock that are "restricted securities" under Rule
144 of the Securities and Exchange Commission; and the Trust also agreed to
contribute to capital Mr. Hargreaves' accrued salary of $276,500, together
with any interest on any of these amounts since June 30, 2004.

          (11) Issued at $0.08 per share on the exercise of outstanding
warrants.

          (12) Issued at $0.06 per share for the payment of expenses on our
behalf.

          We issued all of these securities to persons who were either
"accredited investors," or "sophisticated investors" who, by reason of
education, business acumen, experience or other factors, were fully capable of
evaluating the risks and merits of an investment in our company; and each had
prior access to all material information about us.  We believe that the offer
and sale of these securities were exempt from the registration requirements of
the Securities Act, pursuant to Sections 4(2) and 4(6) thereof, and Rule 506
of Regulation D of the Securities and Exchange Commission and from various
similar state exemptions.

Use of Proceeds of Registered Securities.
-----------------------------------------

     Proceeds from the sale of registered securities received during the year
ended December 31, 2004, totaled $329,240.48.  Approximately $30,000 of these
proceeds were utilized to pay a contractor that assisted us in the development
of our PHER-02 surfactant; an additional $8,815.93 was utilized for accounting
costs; $15,753.03 was paid in attorney's fees; and another $1,213.27 went to
pay for the subscriptions, Business Wire fees and bank charges.

     The remaining funds have been deposited into our savings and checking
accounts, and will be utilized for day to day expenses and our planned FDA
application process regarding PHER-02 through Beckloff.

Purchases of Equity Securities by Us and Affiliated Purchasers.
---------------------------------------------------------------

     There were no purchases of our equity securities by us or any affiliated
purchasers during the calendar year ended December 31, 2005.

Compensation Pursuant to Plans.
-------------------------------

                    Equity Compensation Plan Information
                    ------------------------------------

            Number of                                  Number of securities
            securities                                 remaining available
            to be issued                               for future issuance
            upon exercise       Weighted-average       under equity
            of outstanding      exercise price of      compensation plans
Plan        options, warrants   outstanding options,   excluding securities
category    and rights          warrants and rights    reflected in column (a)
--------    ----------          -------------------    -----------------------
               (a)                      (b)                      (c)

Equity
compen-
sation
plans          -0-                      -0-                      -0-
approved
by
security
holders

Equity
compen-
sation
plans not      3,125,000                .037                  4,375,000
approved
by
security
holders

Total          3,125,000                                      4,375,000

Item 6.  Management's Discussion and Analysis or Plan of Operation.
         ----------------------------------------------------------

Plan of Operation.
------------------

General.
--------

     We have not commenced planned principal operations, but have made good
progress since the end of fiscal 2001,in formulation and stability testing.

     In January, 2001, we were successful in developing improved
formulations of our surfactants for PHER-02.

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

          Stage A (approximately one year): In the first six months, we
          have completed the development of perfluoro-decalin and
          the synthetic surfactants that make up PHER-O2, manufactured
          experimental doses and have performed preliminary animal tests in
          accordance with FDA and overseas regulations.  In the second six
          months, we will produce optimal quantities and conduct animal
          safety and efficacy trials in accordance with FDA and overseas
          requirements.  During the course of Stage A, we estimate that our
          increased technical, administrative, sales/marketing and
          manufacturing requirements will require us to the hire a few
          additional employees.  Estimated cost is not to exceed $500,000,
          divided as follows: Completed surfactant formulation (done) and the
          manufacture of sufficient product for initial testing, (done);
          animal safety and efficacy trials through a sub-contractor, (done);
          and administrative, patent and proprietary right protection and
          marketing costs, $400,000 (in process).

          Stage B (approximately one year [in process): In the second year, we
          intend to prepare New Drug Applications for FDA and selected foreign
          governmental approvals.  During the course of Stage B, we estimate
          that we will need to hire a few additional employees.  Estimated
          cost is $5,000,000, divided as follows: Prepare and file United
          States, European, Chinese and South American New Drug Applications,
          $600,000; conduct human safety and efficacy trials through a
          subcontractor in the United States and overseas, $3,200,000; set-up
          pilot facility, or subcontract, to manufacture small quantities of
          PHER-O2 for use in testing and in connection with the New Drug
          Applications, $500,000; submit license applications for use of
          PHER-O2 in transfusions overseas, $200,000; and administrative,
          patent and proprietary right protection and marketing costs,
          $500,000.

          Stage C (approximately one year): In the third year, we plan to
          complete overseas testing of PHER-O2, begin sales in Europe, China,
          and South America and other overseas areas that may have approved
          PHER-O2 by this time and may begin construction of facility for
          manufacturing, storing, inspecting and shipping PHER-O2. During the
          course of Stage C, we estimate that we will need to hire additional
          employees.  During the third year, we plan to complete testing of
          PHER-O2 in the United States and receive all necessary FDA approvals
          and begin American, South American, Chinese and Canadian sales for
          cancer treatment and angioplasty.  During this period, we also plan
          to subcontract this process, and continue trials of other PHER-O2
          applications, including transplant organ preservation and treatment
          of carbon monoxide poisoning, sickle cell anemia, stroke and heart
          attack.  The estimated cost for Stage C is $25,000,000, divided as
          follows:  Complete human safety and efficacy clinical trials and
          obtain United States and overseas agency approval of PHER-O2,
          $13,000,000; subcontract with major emulsifying firm, $5,000,000;
          recruit and train sales force of the United States and foreign
          markets, $5,000,000; and administrative, patent and proprietary
          right protection and marketing costs, $2,000,000.

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

     Our plan of operation for the next 12 months is to complete the
preparation and submission of the U.S. FDA Investigational New Drug
Application (IND) to support PHER-02 as a synthetic oxygen carrying product or
blood substitute; which will include:

     *    A Gap Analysis for the U.S. IND, meaning a Non-clinical Assessment,
a Clinical Assessment and a Chemistry, Manufacturing and Controls Assessment
(CMC), preparation for an attendance at a Pre-IND meeting with the FDA, and
preparation of a pre-IND briefing document to determine our progress towards
the U.S. IND, with the aid and assistance of Beckloff; and

     *    A Clinical Program and Study Design(s), meaning clinical experts
will be utilized for assessment as well as attendance in the Pre-IND meeting,
(if requested, with the aid and assistance of Beckloff.

     In March, 2006, our Board of Directors resolved to offer for sale in a
private placement 20,000,000 shares of our common stock that are "restricted
securities" as defined in Rule 144 of the Securities and Exchange Commission
for $0.07 per share to "accredited investors" only, as that term is defined in
Rule 501 of Regulation D.  The anticipated aggregate gross proceeds of
$1,400,000 will be utilized by us to fund the FDA required animal studies of
our synthetic red cell blood product, PHER-02, for use in the transportation
of pancreas islet cells in the treatment of diabetes and for other purposes.
We are in the process of preparing the necessary documentation to commence
this offering.  No assurance can be given that we will be successful in
raising these funds; and if we are unable to complete this funding, our
continuing process to obtain FDA approval for the use of our product will be
severely reduced and delayed.

     Our ability to carry out our plan depends entirely upon our ability to
obtain additional substantial equity, debt financing or royalties.  We can not
assure you that we will receive this financing, and except for the possibility
of receiving funds from the exercise of our outstanding warrants, we do not
have any arrangements that would ensure us any funding.  If we do not receive
it, we will not be able to proceed with our business plans.

Results of Operations.
----------------------

     Revenues for the calendar years ending December 31, 2005, and 2004, were
$1,019 and $15,424, respectively.  We had no material operations, except the
research and development activities related to our subcontracted research and
development of our product, PHER-O2.

     We realized a net loss of $372,114 for the year ended December 31, 2005,
and a net gain of $907,725, with a gain of $0.01 per share during the calendar
year ended December 31, 2004.  Most of our expense related to the value of
equity securities issued by us for services rendered.

     Our research and development expenses were $6,400 in 2005, compared to
$14,823 in 2004.  The decrease in 2004 was principally the result of our
limited capital resources.

Liquidity.
----------

     As of December 31, 2005, we had $159,466 in cash, with $88,806 in
current liabilities.

     During the calendar year ended December 31, 2005, we had net expenses of
$382,395, while receiving $1,019 in revenues.  We received $15,424 in
revenues, and had total expenses of $454,004 during the calendar year ended
December 31, 2004.  Most of these expenses related to the value of equity
securities issued by us for services rendered.

     Cash resources at December 31, 2005, and 2004, were $159,466 and
$304,103, respectively.  Liquidity during 2004 was provided by warrant
exercises that resulted in the issuance of 3,241,131 shares for an aggregate
gross proceeds of $329,290.48; during 2005, additional warrant exercises
resulted in the issuance of 1,193,254 shares for an aggregate gross proceeds
of $95,410.

In March, 2006, our Board of Directors resolved to offer for sale in a private
placement 20,000,000 shares of our common stock that are "restricted
securities" as defined in Rule 144 of the Securities and Exchange Commission
for $0.07 per share to "accredited investors" only, as that term is defined in
Rule 501 of Regulation D.  The anticipated aggregate gross proceeds of
$1,400,000 will be utilized by us to fund the FDA required animal studies of
our synthetic red cell blood product, PHER-02, for use in the transportation
of pancreas islet cells in the treatment of diabetes and for other purposes.
We are in the process of preparing the necessary documentation to commence
this offering.  No assurance can be given that we will be successful in
raising these funds; and if we are unable to complete this funding, our
continuing process to obtain FDA approval for the use of our product will be
severely reduced and delayed.

Forward Looking Statements.
---------------------------

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

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

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

Item 7.  Financial Statements.
         ---------------------

<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A DEVELOPMENT STAGE COMPANY)

                CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 2005
<PAGE>







                         C O N T E N T S


Report of Independent Registered Public Accounting Firm. .  F - 3

Consolidated Balance Sheet . . . . . . . . . . . . . . . .  F - 4

Consolidated Statements of Operations. . . . . . . . . . .  F - 6

Consolidated Statements of Stockholders' Equity  . . . . . .F - 7

Consolidated Statements of Cash Flows. . . . . . . . . . . F - 12

Notes to the Consolidated Financial Statements . . . . . . F - 14

<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors of
Sanguine Corporation
Pasadena, CA

We have audited the accompanying consolidated balance sheet of Sanguine
Corporation and Subsidiary (a development stage Company) (the Company) as of
December 31, 2005, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2005 and
2004 and for the period from inception of the development stage on January 18,
1990 through December 31, 2005.  These consolidated financial statements are
the responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sanguine
Corporation and Subsidiary as of December 31, 2005, and the results of its
operations and its cash flows for the years ended December 31, 2005 and 2004,
and for the period from inception of the development stage (January 18, 1990)
through December 31, 2005, in conformity with United States generally accepted
accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in Note 6 to
the consolidated financial statements, the Company has incurred significant
losses which have resulted in an accumulated deficit and has a deficit in
working capital, raising substantial doubt about its ability to continue as a
going concern.  Management's plans in regard to these matters are also
described in Note 6.  The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


/s/HJ Associates & Consultants, LLP

HJ Associates & Consultants, LLP
Salt Lake City, Utah
March 23, 2006

<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
                   Consolidated Balance Sheets

                              ASSETS

                                                             December 31,
                                                                2005

CURRENT ASSETS

 Cash                                                        $    159,466
                                                             ------------
  Total Current Assets                                            159,466

PROPERTY AND EQUIPMENT, NET (Note 1)                                1,267
                                                             ------------
  TOTAL ASSETS                                               $    160,733
                                                             ============

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-4
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
                   Consolidated Balance Sheets



              LIABILITIES AND STOCKHOLDERS' EQUITY

                                                             December 31,
                                                                2005


CURRENT LIABILITIES

 Related party payables (Note 2)                              $     4,000
 Accounts payable                                                  63,493
 Accrued compensation (Note 3)                                     21,313
                                                              -----------
  Total Current Liabilities                                        88,806
                                                              -----------
COMMITMENTS AND CONTINGENCIES (Note 3)

STOCKHOLDERS' EQUITY

 Common stock: 200,000,000 shares authorized of
  $0.001 par value, 80,708,658 shares issued and
  outstanding                                                      80,709
 Additional paid-in capital                                     5,710,806
 Deficit accumulated during the development stage              (5,718,868)
                                                              -----------
  Total Stockholders' Equity                                       71,927
                                                              -----------
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $   160,733
                                                              ===========

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-5
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
              Consolidated Statements of Operations

                                                             From Inception of
                                                              the Development
                                                                    Stage
                                                               on January 18,
                                       For the Years Ended      1990 Through
                                         December 31,           December 31,
                                     2005           2004            2005

REVENUE                            $    1,019    $  15,424      $    176,199
                                   ----------    ---------      ------------
OPERATING EXPENSES

 Professional fees                     76,231      357,578         2,741,454
 Research and development             181,246       14,823         1,363,370
 Selling, general and administrative  133,568       81,603         2,472,153
                                   ----------    ---------      ------------
  Total Operating Expenses            391,045      454,004         6,751,823
                                   ----------    ---------      ------------
LOSS FROM OPERATIONS                 (390,026)    (438,580)       (6,575,624)
                                   ----------    ---------      ------------
OTHER INCOME (EXPENSE)

 Interest income                        9,262          616            37,335
 Interest expense                           -     (103,814)         (667,466)
 Loss on cash deposit                       -            -           (10,020)
 Gain (Loss) on settlement of debt          -    1,449,503         1,496,907
                                   ----------    ---------      ------------
  Total Other Income (Expense)          9,262    1,346,305           856,756
                                   ----------    ---------      ------------
NET INCOME (LOSS)                  $ (380,764)   $ 907,725     $ (5,718,868)
                                   ==========    =========      ============
BASIC INCOME (LOSS) PER SHARE      $    (0.00)   $    0.01
                                   ==========    =========
DILUTED INCOME PER SHARE           $    (0.00)   $    0.02
                                   ==========    =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING BASIC AND DILUTED      80,322,502   48,807,880
                                   ==========   ==========

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-6
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
        Consolidated Statements of Stockholders' Equity

                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance, January 18, 1990
Retroactive restated     1,428,364 $ 1,428 $2,423,214   $     -   ($2,464,642)

Net income from
January 1, 1990 through
January 1, 1991                  -       -          -         -        73,917
                         --------- ------- ----------   -------  ------------
Balance, December 31,
1991                     1,428,364   1,428  2,423,214         -    (2,390,725)

Common stock issued for
services provided at
$0.001 per share             2,720       2          -         -             -

Contributed capital by
officer                          -       -        750         -             -

Net loss for the year
ended December 31,
1992                             -       -          -         -       (77,011)
                         --------- ------- ----------   -------  ------------
Balance, December 31,
1992                     1,431,084   1,430  2,423,964         -    (2,467,736)

Common stock issued to
acquire 94% of outstanding
Stock of Sanguine
Corporation             14,589,775  14,590          -         -       (14,590)

Common stock for cash
at $0.22 per share         510,000     510    109,490         -             -

Net loss for the year
ended December 31,
1993                             -       -          -         -       (92,895)
                        ----------  ------  ---------   -------  ------------
Balance, December 31,
1993                    16,530,859 $16,530 $2,533,454   $     -  $ (2,575,221)
                        ----------  ------  ---------   -------  ------------
The accompanying notes are an integral part of these consolidated financial
statements.
                               F-7
<PAGE>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
           Statements of Stockholders' Equity (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance, December 31,
1993                    16,530,859 $16,530 $2,533,454         -  $ (2,575,221)

Quasi-reorganization             -       - (2,423,964)        -     2,423,964

Common stock for cash
at $0.39 per share         191,000     191     74,809         -             -

Net loss for the year
ended December 31, 1994          -       -          -         -      (230,779)
                        ----------  ------  ---------   -------  ------------
Balance, December 31,
1994                    16,721,859  16,721    184,299         -      (382,036)

Common stock issued for
debt and payables at
$0.11 per share          1,216,000   1,216    128,048         -             -

Common stock issued for
services at $0.13 per
share                    1,625,000   1,625    201,500         -             -

Net loss for the year
ended December 31, 1995          -       -          -         -      (366,843)
                        ----------  ------  ---------  --------  ------------
Balance, December 31,
1995                    19,562,859  19,562    513,847         -      (748,879)

Common stock issued for
Cash at $0.25 per share     10,000      10      2,490         -             -

Common stock issued for
debt and payables at
$0.25 per share            325,506     326     80,605         -             -

Common stock issued for
services at $0.001 per
share                      979,358     979          -           -           -

Net loss for the year
ended December 31, 1996          -       -          -           -    (210,017)
                        ----------  ------   --------     -------  ----------
Balance, December 31,
1996                    20,877,723  20,877    596,942           -    (958,896)

Common stock issued
for services at $0.09
per share                  100,000     100      9,234           -           -

Net loss for the year
ended December 31, 1997          -       -          -           -    (166,212)
                        ----------  ------  ---------     -------  ----------
Balance, December 31,
1997                    20,977,723 $20,977  $ 606,176     $     - $(1,125,108)
                        ---------- -------  ---------     ------- -----------

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-8
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
          Statements of Stockholders' Equity (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance, December 31,
1997                    20,977,723 $20,977  $ 606,176     $     - $(1,125,108)

Common stock issued for
cash $0.10 per share     1,218,000   1,218    120,982           -           -

Common stock issued for
debt and payables $0.22
per share                  240,000     240     52,887           -           -

Common stock issued for
services at $0.12 per
share                      674,494     675     77,952           -           -

Shares canceled           (100,000)   (100)       100           -           -

Net loss for the year ended
December 31, 1998                -       -          -           -    (366,439)
                        ---------- -------  ---------     ------- -----------
Balance, December 31,
1998                    23,010,217  23,010    858,097           -  (1,491,547)

Common stock issued for
cash $0.18 per share        52,777      53      9,447           -           -
Common stock issued for
services $0.10 per share   100,000     100      9,900           -           -

Net loss for the year ended
December 31, 1999                -       -          -           -    (217,864)
                        ---------- -------  ---------     -------  ----------
Balance, December 31,
1999                    23,162,994  23,163    877,444           -  (1,709,411)

Common stock issued for
cash at $0.19 per share  3,318,269   3,318    632,002           -           -

Common stock issued for
services at $0.26 per
share                    1,629,925   1,630    427,370           -           -

Net loss for the year ended
December 31, 2000                -       -          -           -  (1,444,616)
                        ---------- ------- ----------     ------- -----------
Balance at December 31,
2000                    28,111,188  28,111  1,936,816           -  (3,154,027)

Common stock issued for
services at $0.25 per
share                      125,000     126     31,125           -           -

Common stock issued for
services at $0.23 per
share                       75,000      75     17,175           -           -
                        ---------- ------- ----------     ------- -----------
Balance Forward         28,311,188 $28,312 $1,985,116     $     - $(3,154,027)
                        ---------- ------- ----------     ------- -----------

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-9
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
         Statements of Stockholders' Equity (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance Forward         28,311,188 $28,312 $1,985,116     $     - $(3,154,027)

Common stock issued for
services at $0.13 per
share                      825,000     825    103,125           -           -

Common stock issued for
services at $0.17 per
share                       50,000      50      8,500           -           -

Common stock issued for
prepaid services at $0.23
per share                  250,000     250     57,250     (57,500)          -

Common stock issued for
commission of private
placement of common
stock                      327,194     327       (327)          -           -

Common stock issued for
acquisition of subsidiary
stock held by minority
shareholders               840,195     840       (840)          -           -

Amortization of prepaid
expenses                         -       -          -      43,125           -

Net loss for the year
ended December 31, 2001          -       -          -           -  (1,037,570)
                        ---------- ------- ----------     ------- -----------
Balance, December 31,
2001                    30,603,577  30,604  2,152,824     (14,375) (4,191,597)

Additional common stock
issued for acquisition
of subsidiary stock held
by minority shareholders
in prior year               70,030      70        (70)          -           -

Common stock issued for
services at $0.06 and
$0.16 per share          1,615,000   1,615     57,122           -           -

Warrants issued for
services                         -       -    989,956           -           -

Common stock issued for
prepaid services at
$0.06 per share          1,700,000   1,700     94,810     (96,510)          -
                        ---------- ------- ----------    -------- -----------
Balance Forward         33,988,607 $33,989 $3,294,642   $(110,885)$(4,191,597)
                        ---------- ------- ----------    -------- -----------

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-10
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
         Statements of Stockholders' Equity (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance Forward         33,988,607 $33,989 $3,294,642   $(110,885)$(4,191,597)

Common stock issued for
cash less warrants
exercised at $0.06-$0.13
per share                  500,000     500    103,125           -           -

Common stock issued for
exercise of warrants for
cash at $0.08 per share    310,000     310     24,490           -           -

Amortization of prepaid
expenses                         -       -          -      14,375           -

Net loss for the year
ended December 31, 2002          -       -          -           -  (1,729,701)
                        ---------- ------- ----------   --------- -----------
Balance, December 31,
2002                    34,798,607  34,799  3,422,257     (96,510) (5,921,298)

Common stock issued for
cash-less option
exercise at $0.03 and
$0.04 per share for
services and prepaid
services                   625,000     625     23,375     (19,231)          -

Common stock issued for
services at $0.03-$0.11
per share                  150,000     150      9,038           -           -

Common stock issued for
debt at $0.03 and $0.02
per share                2,063,369   2,063     52,964           -           -

Common stock issued for
debt and prepaid
expenses at $0.08 per
share                    1,000,000   1,000     79,000     (62,943)          -

Amortization of prepaid
expenses                         -       -          -     115,741           -

Net loss for the year
ended December 31, 2003          -       -          -           -    (324,531)
                        ---------- ------- ----------   --------- -----------
Balance, December 31,
2003                    38,636,976 $38,637 $3,586,634   $ (62,943)$(6,245,829)
                        ---------- ------- ----------   --------- -----------


The accompanying notes are an integral part of these consolidated financial
statements.
                               F-11
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
         Statements of Stockholders' Equity (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance Forward         38,636,976 $38,637 $3,586,634   $ (62,943)$(6,245,829)

Common stock issued for
cash-less option
exercise at $0.06 and
$0.08 per share for
services                 3,528,666   3,529    246,192           -           -

Common stock issued for
services at $0.26
per share                  150,000     150     38,850     (62,943)          -

Common stock issued for
debt at $0.04 and $0.07
per share               33,302,502  33,302  1,319,425           -           -

Common stock issued for
Cash at $0.08-$0.15
per share                3,241,131   3,241    326,049           -           -

Common stock issued for
Cash-less warrant exercise
at  $0.28 per share         83,629      84        (84)          -           -

Net income for the year
ended December 31, 2004          -       -          -           -     907,725
                       ----------- ------- ----------  ----------  ----------
Balance,
December 31, 2004       78,942,904  78,943  5,517,066           -  (5,338,104)

Common stock issued for
services at $0.11-$0.30
per share                  412,500     413     80,713           -           -

Common stock issued for
cash at $0.08 per share  1,193,254   1,193     94,217           -           -

Common stock issued for
debt reduction at $0.06
per share                  160,000     160      9,440           -           -

Net loss for the year
ended December 31, 2005          -       -          -           -    (380,764)
                       ----------- ------- ----------  ----------  ----------
Balance,
December 31, 2005       80,708,658 $80,709 $5,701,436  $        - $(5,718,868)
                       =========== ======= ==========  ========== ===========


The accompanying notes are an integral part of these consolidated financial
statements.
                               F-12
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
              Consolidated Statements of Cash Flows


                                                             From Inception of
                                                              the Development
                                                                    Stage
                                                               on January 18,
                                       For the Years Ended      1990 Through
                                         December 31,           December 31,
                                     2005           2004            2005
CASH FLOWS FROM OPERATING ACTIVITIES:

 Net income (loss)                  $  (380,764) $  907,725      $ (5,718,868)
 Adjustments to reconcile net loss
 to net cash used by operating
 activities:
  Depreciation and amortization             224           -             4,833
  Common stock issued for services       81,126     268,884         2,515,337
  Stock warrants granted                  8,650           -             8,650
  Interest on beneficial conversion
  feature                                     -           -            25,000
  Legal expense related to beneficial
  conversion feature                          -           -             3,750
  Note payable issued for services            -           -           727,950
  Gain on extinguishments of debt             -     (51,422)          (98,826)
  Gain on conversion of debt to
  equity                                      -  (1,398,081)       (1,398,081)
  Recognition of prepaid expenses and
  expenses prepaid with common stock          -      62,943           456,184
 Changes in assets and liabilities:
  Increase in accounts payable and
  related party payables                 41,020       7,459           391,681
  Increase in accrued interest payable        -     103,814           547,279
  Increase in accrued liabilities             -       7,756            10,125
  Increase in customer deposits               -      45,000            45,000
  Increase in accrued salaries           11,118           -           855,188
                                       --------  ----------    --------------
   Net Cash Used by Operating
   Activities                          (238,556)    (45,922)       (1,624,798)

CASH FLOWS FROM INVESTING ACTIVITIES

 Cash paid for fixed assets              (1,491)          -            (6,100)
                                       --------  ----------    --------------
   Net Cash Used by Investing
   Activities                            (1,491)          -            (6,100)
                                       --------  ----------    --------------
CASH FLOWS FROM FINANCING ACTIVITIES

 Proceeds from warrant conversion        95,410     329,290           424,700
 Proceeds from notes payable and notes
 payable-related party                        -      18,762           212,139
 Payments on notes payable and notes
 payable related party                        -           -            (9,400)
 Proceeds from issuance of convertible
 debentures                                   -           -            40,000
 Contributed capital                          -           -               750
 Common stock issued for cash                 -           -         1,122,175
                                       --------  ----------    --------------
  Net Cash Provided by Financing
  Activities                             95,410     348,052         1,790,364
                                       --------  ----------    --------------
NET INCREASE (DECREASE) IN CASH        (144,637)    302,130           159,466

CASH AT BEGINNING OF YEAR               304,103       1,973                 -
                                       --------  ----------    --------------
CASH AT END OF YEAR                    $159,466  $  304,103    $      159,466
                                       ========  ==========    ==============

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-13
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
        Consolidated Statements of Cash Flows (Continued)


                                                             From Inception of
                                                              the Development
                                                                    Stage
                                                               on January 18,
                                       For the Years Ended      1990 Through
                                         December 31,           December 31,
                                     2005           2004            2005
SUPPLEMENTAL SCHEDULE OF CASH FLOW
ACTIVITIES

CASH PAID FOR:

  Interest                          $       -       $       -      $        -
  Income taxes                      $       -       $       -      $        -

NON-CASH FINANCING ACTIVITIES

  Conversion stock issued for debt
   conversion                       $   9,600       $       -      $    9,600
  Common stock issued for services
  rendered                          $   81,126      $  268,884     $2,515,337
  Interest on beneficial conversion
  feature                           $        -      $        -     $   25,000
  Legal expense related to beneficial
  conversion feature                $        -      $        -     $    3,750
  Notes payable issued for services $        -      $        -     $  727,950
  Common stock issued for prepaid
  services                          $        -      $        -     $  236,284
  Common stock issued for debt      $        -      $2,822,067     $2,822,067

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-14

<PAGE>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
                Notes to the Financial Statements
                    December 31, 2005 and 2004

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a.  Organization

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

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

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

     From 1974 to 1980, the Company engaged in several business ventures.
     These business activities resulted in the loss of all Company assets.
     Because of the search for a new business venture, the Company has
     entered into the "development stage company" status again.  The Company
     is a development stage company and these financial statements are
     presented as those of a development stage company effective January 18,
     1990, coinciding with the incorporation date of Sanguine Corporation.

     b.  Accounting Method

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

     c.  Basic and Diluted Income (Loss) Per Share

     The computation of basic income (loss) per share of common stock is
     based on the weighted average number of shares outstanding during the
     period.
                                                     For the Years Ended
                                                         December 31,
                                                    2005            2004


       Loss (numerator)                           $(372,114)  $   907,725
       Shares (denominator)                      80,322,502    40,051,302
       Per share amount                              $ (.00)       $  .02

<PAGE>                         F-15
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (Continued)

       c.  Basic and Diluted Income (Loss) Per Share (continued)

       The computation of diluted income (loss) per share of common stock is
       based on the weighted average number of shares outstanding during the
       period.

                                                     For the Years Ended
                                                         December 31,
                                                       2005         2004

       Loss (numerator)                           $(372,114)   $  907,725
       Shares (denominator)                      80,322,502    48,807,880
       Per share amount                              $ (.00)       $  .02


       The Company's outstanding stock options have been excluded from the
        2005 basic net loss per share calculation as they are anti-dilutive.
The
       Company has excluded common stock equivalents.

       d.  Estimates

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

       e.  Income Taxes

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

<PAGE>                         F-16

               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (Continued)

       e.  Income Taxes (Continued)

       Net deferred tax liabilities asset consists of the following
       components as of December 31, 2005 and 2004:

                                              2005            2004

       Deferred tax assets:
        NOL Carryover                      $ 978,360      $ 876,960
        Accured Salaries                       8,300              -
                                           ---------      ---------
                                           $ 986,660      $ 876,960
       Deferred tax assets liabilities:

        Valuation allowance                 (986,660)      (876,960)
                                           ---------      ---------
        Net deferred tax asset             $       -      $       -
                                           =========      =========


  The income tax provision differs from the amount of income tax determined
  by applying the U.S. federal and state income tax rates of 39% to pretax
  income from continuing operations for the years ended December 31, 2005 and
  2004 due to the following:

                                               2005            2004

        Book Income                          $ (145,125)   $  370,703
        NOL carryforward                              -      (535,105)
        Stock for Services/Options Expense       35,383       164,402
        Meals and Entertainment                      58             -
        Change in valuation allowance           109,684             -
                                             ----------    ----------
                                             $        -    $        -
                                             ==========    ==========

       At December 31, 2005, the Company had net operating loss
       carryforwards of approximately $2,500,000 that may be offset against
       future taxable income from the year 2005 through 2025.  No tax benefit
       has been reported in the December 31, 2005 consolidated financial
       statements since the potential tax benefit is offset by a valuation
       allowance of the same amount.

<PAGE>                         F-17
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (Continued)

       e.  Income Taxes (Continued)

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

       f.  Development Stage

       The Company is considered a development stage Company as defined in
       SFAS No. 7, "Accounting For Development Stage Enterprises".  The
       Company is devoting substantially all of its efforts to research and
       development and obtaining financing.  Principal operations have not
       commenced and no significant revenues have been derived from
       operations since inception.  The Company has, at the present time,
       not paid any dividends and any dividends that may be paid in the
       future will depend upon the financial requirements of the Company and
       other relevant factors.

       g.  Property and Equipment

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

                                                        December 31,
                                                           2005


        Furniture and fixtures                       $       1,491

        Accumulated depreciation                              (224)
                                                     -------------
            Total Fixed Assets                       $       1,267
                                                     =============

       h. Revenue Recognition

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


<PAGE>                         F-18
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (Continued)

       i.      Newly Adopted Accounting Pronouncements

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

     In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an
     amendment of ARB No. 43, Chapter 4. The amendments made by Statement 151
     clarify that abnormal amounts of idle facility expense, freight,
     handling costs, and wasted materials (spoilage) should be recognized as
     current-period charges and require the allocation of fixed production
     overheads to inventory based on the normal capacity of the production
     facilities. The guidance is effective for inventory costs incurred
     during fiscal years beginning after June 15, 2005. Earlier application
     is permitted for inventory costs incurred during fiscal years beginning
     after November 23, 2004. The Company has evaluated the impact of the
     adoption of SFAS 151, and does not believe the impact will be
     significant to the Company's overall results of operations or financial
     position.

     In December 2004, the FASB issued SFAS No.152, "Accounting for Real
     Estate Time-Sharing Transactions--an amendment of FASB Statements No. 66
     and 67" ("SFAS 152) The amendments made by Statement 152 This Statement
     amends FASB Statement No. 66, Accounting for Sales of Real Estate, to
     reference the financial accounting and reporting guidance for real
     estate time-sharing transactions that is provided in AICPA Statement of
     Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
     Transactions. This Statement also amends FASB Statement No. 67,
     Accounting for Costs and Initial Rental Operations of Real Estate
     Projects, to state that the guidance for (a) incidental operations and
     (b) costs incurred to sell real estate projects does not apply to real
     estate time-sharing transactions. The accounting for those operations
     and costs is subject to the guidance in SOP 04-2. This Statement is
     effective for financial statements for fiscal years beginning after June
     15, 2005. The Company has evaluated the impact of the adoption of SFAS
     152, and does not believe the impact will be significant to the
     Company's overall results of operations or financial position.

     In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary
     Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary
     Transactions."The amendments made by Statement 153 are based on the
     principle that exchanges of nonmonetary assets should be measured based
     on the fair value of the assets exchanged. Further, the amendments
     eliminate the narrow exception for nonmonetary exchanges of similar
     productive assets and replace it with a broader exception for exchanges
     of nonmonetary assets that do not have commercial substance. Previously,
     Opinion 29 required that the accounting for an exchange of a productive
     asset for a similar productive asset or an equivalent interest in the
     same or similar productive asset should be based on the recorded amount
     of the asset relinquished. Opinion 29 provided an exception to its basic
     measurement principle (fair value) for exchanges of similar productive
     assets. The Board believes that exception required that some nonmonetary
     exchanges, although commercially substantive, be recorded on a carryover
     basis.  By focusing the exception on exchanges that lack commercial
     substance, the Board believes this Statement

                               F-19
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     i.   Newly Adopted Accounting Pronouncements (continued)

     produces financial reporting that more faithfully represents the
     economics of the transactions. The Statement is effective for
     nonmonetary asset exchanges occurring in fiscal periods beginning after
     June 15, 2005. Earlier application is permitted for nonmonetary asset
     exchanges occurring in fiscal periods beginning after the date of
     issuance. The provisions of this Statement shall be applied
     prospectively. The Company has evaluated the impact of the adoption of
     SFAS 153, and does not believe the impact will be significant to the
     Company's overall results of operations or financial position.

     In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-
     Based Payment". Statement 123(R) will provide investors and other users
     of financial statements with more complete and neutral financial
     information by requiring that the compensation cost relating to share-
     based payment transactions be recognized in financial statements. That
     cost will be measured based on the fair value of the equity or liability
     instruments issued. Statement 123(R) covers a wide range of share-based
     compensation arrangements including share options, restricted share
     plans, performance-based awards, share appreciation rights, and employee
     share purchase plans. Statement 123(R) replaces FASB Statement No. 123,
     Accounting for Stock-Based Compensation, and supersedes APB Opinion No.
     25, Accounting for Stock Issued to Employees. Statement 123, as
     originally issued in 1995, established as preferable a fair-value-based
     method of accounting for share-based payment transactions with
     employees. However, that Statement permitted entities the option of
     continuing to apply the guidance in Opinion 25, as long as the footnotes
     to financial statements disclosed what net income would have been had
     the preferable fair-value-based method been used. Public entities (other
     than those filing as small business issuers) will be required to apply
     Statement 123(R) as of the first interim or annual reporting period that
     begins after June 15, 2005. The Company adopted Statement 123(R) in
     December of 2005.

     In December 2004, the Financial Accounting Standards Board issued two
     FASB Staff Positions - FSP FAS 109-1, Application of FASB Statement 109
     "Accounting for Income Taxes" to the Tax Deduction on Qualified
     Production Activities Provided by the American Jobs Creation Act of
     2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the
     Foreign Earnings Repatriation Provision within the American Jobs
     Creation Act of 2004. Neither of these affected the Company as it does
     not participate in the related activities.


                               F-20
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     i.  Newly Adopted Accounting Pronouncements (Continued)

     In March 2005, the SEC released Staff Accounting Bulletin No. 107,
     "Share-Based Payment" ("SAB 107"), which provides interpretive guidance
     related to the interaction between SFAS 123(R) and certain SEC rules and
     regulations. It also provides the SEC staff's views regarding valuation
     of share-based payment arrangements. In April 2005, the SEC amended the
     compliance dates for SFAS 123(R), to allow companies to implement the
     standard at the beginning of their next fiscal year, instead of the next
     reporting period beginning after June 15, 2005. Management is currently
     evaluating the impact SAB 107 will have on our consolidated financial
     statements.

     In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting
     for Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47
     provides guidance relating to the identification of and financial
     reporting for legal obligations to perform an asset retirement activity.
     The Interpretation requires recognition of a liability for the fair
     value of a conditional asset retirement obligation when incurred if the
     liability's fair value can be reasonably estimated. FIN 47 also defines
     when an entity would have sufficient information to reasonably estimate
     the fair value of an asset retirement obligation. The provision is
     effective no later than the end of fiscal years ending after December
     15, 2005. The Company will adopt FIN 47 beginning the first quarter of
     fiscal year 2006 and does not believe the adoption will have a material
     impact on its consolidated financial position or results of operations
     or cash flows.

     In May 2005, the FASB issued FASB Statement No. 154, "Accounting Changes
     and Error Corrections." This new standard replaces APB Opinion No. 20,
     "Accounting Changes, and FASB Statement No. 3, Reporting Accounting
     Changes in Interim Financial Statements," and represents another step in
     the FASB's goal to converge its standards with those issued by the IASB.
     Among other changes, Statement 154 requires that a voluntary change in
     accounting principle be applied retrospectively with all prior period
     financial statements presented on the new accounting principle, unless
     it is impracticable to do so. Statement 154 also provides that (1) a
     change in method of depreciating or amortizing a long-lived non-
     financial asset be accounted for as a change in estimate (prospectively)
     that was effected by a change in accounting principle, and (2)
     correction of errors in previously issued financial statements should be
     termed a "restatement." The new standard is effective for accounting
     changes and correction of errors made in fiscal years beginning after
     December 15, 2005. Early adoption of this standard is permitted for
     accounting changes and correction of errors made in fiscal years
     beginning after June 1, 2005 . The Company has evaluated the impact of
     the adoption of Statement 154 and does not believe the impact will be
     significant to the Company's overall results of operations or financial
     position.

                               F-21
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     i.  Newly Adopted Accounting Pronouncements (Continued)

     In February of 2006, the FASB issued SFAS No. 155, "Accounting for
     Certain Hybrid Financial Instruments", which is intended to simplify the
     accounting and improve the financial reporting of certain hybrid
     financial instruments (i.e., derivatives embedded in other financial
     instruments). The statement amends SFAS No. 133, "Accounting for
     Derivative Instruments and Hedging Activities", and SFAS No. 140,
     "Accounting for Transfers and Servicing of Financial Assets and
     Extinguishments of Liabilities a replacement of FASB Statement No. 125."
     SFAS No. 155 is effective for all financial instruments issued or
     acquired after the beginning of an entity's first fiscal year that
     begins after September 15, 2006.. The Company is currently evaluating
     the impact SFAS No. 155 will have on its consolidated financial
     statements, if any.


       j.  Equity Securities

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

       k.  Stock Options

       As permitted by FASB Statement 148 "Accounting for Stock Based
       Compensation - Transition and Disclosure" (SFAS No. 148), the Company
       elected to measure and record compensation cost relative to employee
       stock option costs in accordance with Accounting Principles Board
       ("APB") Opinion 25, "Accounting for Stock Issued to Employees," and
       related interpretations and make proforma disclosures of net income
       and earnings per share as if the fair value method of valuing stock
       options had been applied.  Under APB opinion 25, compensation cost is
       recognized for stock options granted to employees when the option
       price is less that the market price of the underlying common stock on
       the date of grant.

       l.      Valuation of Options and Warrants

       The valuation of options and warrants granted to unrelated parties
       for services are measured as of the earlier of (1) the date at which
       a commitment for performance by the counterparty to earn the equity
       instrument is reached, or (2) the date the counterparty's performance
       is complete.  Pursuant to the requirements of EITF 96-18, the options
       and warrants will continue to be revalued in situations where they
       are granted prior to the completion of the performance.

        m.  Cash and Cash Equivalents

       The Company considers all highly liquid investments with a maturity
       of three months or less when purchased to be cash equivalents.


<PAGE>                         F-22
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 2 - RELATED PARTY TRANSACTIONS

       Related party payables at December 31, 2005 and 2004 represents
       amounts owed to officers of the Company for reimbursement of expenses
       paid of $4,000.

       During the year ended December 31, 2004, the Company authorized the
       issuance of an aggregate of 32,777,266 shares of the Company's common
       stock for:  (i) the cancellation of certain debts in the amount of
       $1,313,144, and (ii) the contribution to the capital of accrued
       salary and interest on debt by members of management in the amount of
       $1,327,630.  An additional 3,280,000 shares of common stock were
       authorized to be issued for services rendered to the Company.  The
       issuance of these shares is reflected in these financial statements.

       In addition, two convertible notes payable in the aggregate amount of
       $28,750, plus accrued interest, were converted into 773,902 shares
       of common stock of the Company.  The issuance of these shares is
       reflected in these financial statements.

NOTE 3 - COMMITMENTS AND CONTINGENCIES

       During February 1994, the Company entered into a lease for office
       space in Pasadena, California.  The lease has been extended three
       times through April 2004 with monthly rent payments of $1,744 with
       annual increases.

       Future minimum lease payments under this non-cancelable operating
       lease are $7,364 through April 2004.  Currently the lease is on a
       month-to-month basis.

       Rent expense was $19,412 and $24,556 for the years ended December 31,
       2005 and 2004, respectively.

       Employment Agreements

       Beginning the quarter ended September 30, 2004, the CEO, CFO and Vice
       President are each entitled to receive 12,500 shares of common stock
       of the company and restricted securities.  Such compensation is to be
       paid quarterly.

       As of December 31, 2005, a total of $21,313 in compensation has been
       accrued.

<PAGE>                         F-23
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)

       License Agreement

       During February and April 2002, the Company entered into a 25 year
       exclusive license agreement with an entity by granting the exclusive
       license rights to its PHER-02 product and associated processes and
       technologies.  This entity has been granted this exclusive license
       for Asia, including the People's Republic of China, Thailand, Laos,
       Cambodia, Vietnam, Singapore, Malaysia, Indonesia, North Korea,
       Burma, Mongolia and Taiwan.

       In 2004 we terminated Ascendiant-Asia's and Ascendiant-South
       America's Exclusive License Agreement for failure to meet the minimum
       production or to pay royalties due pursuant to the terms of that
       Exclusive License Agreement.

NOTE 4 - COMMON STOCK TRANSACTIONS

       During the year ended December 31, 2005, the Company issued 412,500
       shares of common stock for services valued at $81,126; 160,000 shares
       issued for payables of $10,000; 1,193,254 shares issued for warrants
       exercises valued at $95,410.

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

NOTE 5 - STOCK OPTIONS AND WARRANTS

       During January and March 2003, the Company issued options to purchase
       1,625,000 shares of common stock to non-employees for services.  The
       options were exercisable at $0.04 per share and were immediately
       exercised upon insurance in payment of services.  As the options were
       exercised immediately, no expense was recognized upon grant.

       During February 2002, the Company entered into a consulting agreement
       which provides for the issuance of 300,000 warrants.  The consultant
       received 100,000 warrants upon signing the contract while the
       remaining 200,000 warrants are contingent upon receipt of funding
       generated by the consultant.  The warrants are exercisable at a price
       of $0.125 per share and expire February 6, 2007.  As of December 31,
       2002, no funding has been generated by the consultant and 100,000
       warrants are issued and exercisable.  The Company recognized $11,252
       in expense associated with the issuance of these warrants.

       During February 2002, the Company issued three warrants to purchase
       an aggregate of 3,000,000 shares of the Company's common stock to
       individuals related to an entity that received the exclusive license
       rights of the Company's PHER-02 product in Asia (See Note 4).  The
       warrants are exercisable at a price of $0.15 per share and expire
       February 21, 2005.  The warrants also have a call provision, which
       the Company can exercise and require the holders of the warrants to
       exercise their warrants if at any time the Company's common stock
       trades for an

<PAGE>                         F-24
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 5 - STOCK OPTIONS AND WARRANTS (Continued)

       amount equal to or greater than $1.00 per share for 10 consecutive
       trading days.  The Company recognized $237,455 in expense associated
       with the issuance of these warrants.

       During March 2002, and in connection with the issuance of a
       convertible debenture, the Company issued warrants to purchase
       5,937,500 shares of common stock at an exercise price of the greater
       of $0.08 or 66 2/3% of the five-day trading average of the Company's
       common stock.  The Company recognized $682,465 in expense associated
       with the issuance of these warrants.

       During March 2002, the Company issued a warrant to an individual to
       acquire up to 500,000 shares of the Company' s common stock for
       services.  The exercise price of the warrant is the lower of 50% of
       the average bid price of the Company's common stock for the five
       trading days prior to the exercise of the warrant or $0.08 per share.
       The warrant expires March 11, 2005.  The Company recognized $58,784 in
       expense associated with the issuance of these warrants.

       A summary of the status of the Company's outstanding stock options as
       of December 31, 2005 and 2004 and changes during the years then ended
       is presented below:


                                         2005                    2004
                                               Weighted               Weighted
                                                Average                Average
                                               Exercise               Exercise
                                  Shares         Price     Shares       Price
   Outstanding, beginning of
   year                         8,756,578  $ 0.15    10,997,709   $ 0.30
   Granted                         80,000    0.10             -        -
   Expired/Cancelled           (4,799,567)   0.21             -        -
   Exercised                   (1,193,254)   0.08    (2,241,131)    0.08
                               ----------  ------    ----------   ------
   Outstanding end of year      2,843,757  $ 0.09     8,756,578   $ 0.15
                               ==========  ======    ==========   ======
   Exercisable                  2,843,757  $ 0.09     8,756,578   $ 0.15
                               ==========  ======    ==========   ======

                              Outstanding                   Exercisable

                                Weighted
                     Number      Average   Weighted   Number    Weighted
                 Outstanding    Remaining  Average  Exercisable  Average
       Range of  at December Contractual  Exercise at December Exercise
 Exercise Prices  31, 2005        Life     Price     31, 2005    Price

     $   0.1275    470,642         .70     $0.1275     470,642   $  0.1275
           0.08  2,193,115        1.20        0.08   2,193,115        0.08
          0.125    150,000        1.00       0.125     150,000       0.125
           0.08     30,000        2.20        0.28      30,000        0.28
     ----------  ---------       -----     -------   ---------     -------
   $0.08-0.1275  2,843,757                 $  0.09   2,843,757     $  0.09
                ==========                 =======  ==========     =======


<PAGE>                         F-26
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 6 - GOING CONCERN

       The Company's consolidated financial statements are prepared using
       generally accepted accounting principles applicable to a going
       concern, which contemplates the realization of assets and liquidation
       of liabilities in the normal course of business.  The Company has
       historically incurred significant losses, which have resulted in an
       accumulated deficit of $5,710,218 at December 31, 2005, which raises
       substantial doubt about the Company's ability to continue as a going
       concern.  The accompanying financial statements do not include any
       adjustments relating to the recoverability and classification of
       asset carrying amounts or the amount and classification of
       liabilities that might result from the outcome of this uncertainty.
       The Company's management has taken certain steps to maintain its
       operating and financial requirements in an effort to enable the
       Company to continue as a going concern until such time that revenues
       are sufficient to cover expenses, including:

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

       The ability of the Company to continue as a going concern is
       dependent upon its ability to successfully accomplish the plan
       described above, and eventually attain profitable operations.  The
       accompanying financial statements do not include any adjustments that
       might be necessary if the Company is unable to continue as a going
       concern.


<PAGE>                         F-27
Item 8.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------

     During the past two fiscal years, and since then, there has been no
changes in our independent auditors or any disagreement on accounting and
financial disclosure.

Item 8(a).  Controls and Procedures.
------------------------------------

     As of the end of the period covered by this Annual Report, we carried
out an evaluation, under the supervision and with the participation of our
President and Secretary/Treasurer, of the effectiveness of the design and
operation of our disclosure controls and procedures.  Based on this
evaluation, our President and Chief Financial Officer concluded that our
disclosure controls and procedures are effectively designed to ensure that
information required to be disclosed or filed by us is recorded, processed or
summarized, within the time periods specified in the rules and regulations of
the Securities and Exchange Commission.  It should be noted that the design of
any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.  In addition, we reviewed our internal
controls, and there have been no significant changes in our internal controls
or in other factors that could significantly affect those controls subsequent
to the date of their last evaluation.

Item 8(b).  Other Information.
------------------------------

     None; not applicable.

                                 PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------

Identification of Directors and Executive Officers.
---------------------------------------------------

     The following table sets forth the names of all of our current directors
and executive officers.  These persons will serve until the next annual
meeting of the stockholders or until their successors are elected or appointed
and qualified, or their prior resignations or terminations.

Directors and Executive Officers.
---------------------------------

                                               Date of            Date of
                            Positions         Election or       Termination
  Name                      Held              Designation      or Resignation
  ----                      ----              -----------      --------------
Thomas C. Drees,            CEO                    6/93              *
Ph.D., MBA                  President              1/98              *
                            Chairman              11/95              *
                            Director               6/93              *

David E. Nelson, CPA        Director               3/96              *
                            Chief Financial        3/96              *
                            Officer
                            Secretary/Treasurer    6/03              *

Edward L. Kunkel, Esq.      Director               4/94              *

          *    These persons presently serve in the capacities
               indicated.


Term of Office.
---------------

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

Medical Advisory and Applications Board of Directors.
-----------------------------------------------------

                                               Date of          Date of
                            Positions         Election or      Termination
  Name                      Held              Designation      or Resignation
  ----                      ----              -----------      --------------
Craig Morrison, M.D.        Member               10/00               *

Leon Cass Terry, M.D.,      Member               10/00               *
Ph.D.

Herbert J. Meiselman,       Member               10/00               *
Sc.D.

Robert Kwun, M.D.           Member               12/04               *

Jonathan Lakey, Ph.D.        Member               10/05             *

Business Experience.
--------------------

     Thomas C. Drees, Ph.D., MBA, Chairman, President, CEO and a Director. Dr.
Drees, age 77, is the founder of Sanguine California.  Dr. Drees was Vice
President and General Manager of Abbott Scientific Products Division,
collector of blood plasma derivatives and manufacturer of human blood
derivatives from 1973 to 1978.  From 1978 to 1984, he was the President and
CEO of Alpha Therapeutics Corporation, a subsidiary of Green Cross Corporation
of Japan and the developer of Fluosol DA 20, the only FDA-approved synthetic
blood product.  For 33 years, Dr. Drees has been involved at top management
levels with the collection, manufacture and marketing of human blood plasma
derivatives.  He has written many publications on the subject, including the
widely-acclaimed book "Blood Plasma: The Promise and the Politics," Ashley
Books, New York, 1983.

     David E. Nelson, CPA, Chief Financial Officer and Director.  Mr. Nelson,
age 62, received a B.S. degree in accounting from the University of Utah in
1966.  He has over 20 years' experience in operations, finance and regulatory
compliance of stock brokerage firms.  He is the past President of Covey &
Company, Inc., a broker/dealer formerly registered with the Securities and
Exchange Commission.  Mr. Nelson has been a member of the NASD's Board of
Arbitrators, the American Institute of Certified Public Accountants and the
Utah Association of Certified Public Accountants.

     Edward L. Kunkel, Esq., Director.  Mr. Kunkel is 58 years of age.
He graduated with a Juris Doctor degree from the University of Southern
California in 1973.  From 1973 to 1978, he practiced law with the firm of
Karns & Karabian in Los Angeles, California.  From 1978 to the present, he has
practiced educational law, real estate law and general business law in his own
firm.  Mr. Kunkel is a member of the State Bar of California, the Los Angeles
County Bar Association and the National School Board Attorneys' Association.
He has also been a licensed real estate broker since 1979.

     Craig Morrison, M.D., Advisory Board Member, is 63 years of age, and
practices at the Brigham Young Student Health Center.  He has been an
attending and consulting staff general surgeon since 1978 at the following
hospitals: Utah Valley Regional Medical Center, Orem Community Hospital,
Colombia Mountain View Hospital and Central Valley Hospital.  Dr. Morrison
received his Doctor of Medicine Degree from the University of Oregon Medical
School in 1970, followed by a pediatric internship and surgical residency at
the University of Southern California-Los Angeles County Hospital and the
Huntington Memorial Hospital in 1975.

     Leon Cass Terry, M.D., Ph.D., Advisory Board Member, is 64 years of age,
and joined the Medical College of Wisconsin as a Professor of Neurology and
Professor of Physiology in 1989, and has recently retired.  Focusing on his
professorial duties, Dr. Terry recently stepped down from his position as the
Chairman of Neurology, which he held from June of 1989 to May, 2000.  During
his tenure, Dr. Terry was the Associate Dean for Ambulatory Care from January,
1997 to March, 1998, and was the Chief of Staff from January, 1997 to January,
1999.  He also held previous teaching and professional positions as a Research
Scientist for the University of Michigan, Institute of Gerontology; Professor
of Neurology and Associate Professor of Physiology and Neurology at the
University of Michigan; and Associate Professor of Neurology at the University
of Tennessee Center for Health Sciences.  Dr. Terry earned his Doctorate of
Pharmacology from the University of Michigan, his Doctor of Medicine from
Marquette University Medical School, his Ph.D. in Experimental Medicine from
McGill University Medical School and his Master of Business Administration
from the University of South Florida.  Dr. Terry has authored over 100 peer-
reviewed articles, abstracts and book chapters in well known and respected
publications.  He was also principal or co-investigator on over 30 grants from
the National Institute of Health, various pharmaceutical companies,
philanthropic donations and others.  He has also conducted clinical trials in
various neurologic disorders.

     Herbert J. Meiselman, Sc.D., Advisory Board Member, is 65 years of age.
He is an active Professor and Vice Chairman of the University of Southern
California School of Medicine, Department of Physiology and Biophysics.
Professor Meiselman graduated from Michigan Technical University with a BS
degree in 1962.  He received a Sc.D. degree from the Massachusetts Institute
of Technology in 1965.  As a Research Fellow at the California Institute of
Technology, he studied in-vivo microcirculatory blood flow from 1966 to 1968.
In 1968, he expanded his research studies to include in-vivo blood rheology, a
program jointly administered by the California Institute of Technology and the
University of Southern California Medical School.  Since 1972, Dr. Meiselman's
research at the University of Southern California has been concentrated in the
areas of blood rheology and the physical behavior of red blood cells and white
blood cells.  He has authored or co-authored over 300 papers on numerous
blood-related topics.

     Robert Kwun, M.D., Advisory Board Member, is 40 years of age.  He
graduated from Harvard University, and then received his medical degree from
Columbia University, in New York.  His clinical training includes Columbia
University's Manhattan Eye Ear and Throat Hospital, Los Angles Children's- USC
Medical Center, the Doheny Eye Institute and New York's St. Vincent's
Hospital.

     Jonathan Lakey, Ph.D., Advisory Board Member, is 42 years of age.  Dr.
Lakey obtained is Ph.D. in Experimental Surgery at the University of Alberta
in 1995.  In 1998, he established his research laboratory in the Department of
Surgery at the Surgical Medical Research Institute at the University of
Alberta.

     His research efforts have focused on cell and tissue preservation and
transplantation, with specific focus on the isolation and survival of
pancreatic islets for clinical transplantation into patients with diabetes.
His contributions and partnership with Dr. James Shapiro led towards the
improvement of islet isolation techniques and the "Edmonton Protocol" for
patients with Type 1 diabetes.

     Dr. Lakey has been awarded several scholarships and research awards for
his research achievements in islet transplantation from the Alberta Heritage
Foundation for Medical Research, Canadian Diabetes Association and the
Juvenile Diabetes Foundation International ("JDFI") and University Hospital
Foundation and Diabetes Wellness Foundation.  Dr. Lakey is the co-director of
the JDFI Centre in Edmonton and Director of the JDFI Human Islet Distribution
Program at the University of Alberta.  Dr. Lakey serves on editorial boards of
several diabetes and transplantation journals, reviews manuscripts for several
journals and a Councilor for Cell Transplant Society.

     Among his honors, Dr. Lakey is the recipient of the Outstanding
Leadership in Science Award from Alberta Science & Technology, Outstanding
Achievement Award from the Canadian Diabetes Association and Studentship
Awards from the Canadian Society for Clinical Investigations Trainee Award and
Royal College of Physicians and Surgeons.  Dr. Lakey was recently honored with
the Meritorious Service Medal (2005) by the Governor General of Canada.

     Dr. Lakey has been widely published with over 200 referred papers and 16
book chapters, and submitted 346 scientific abstracts, and has recently
published a book on islet isolation.  Among the research efforts, Dr. Lakey
and his team have assisted with several islet transplant centers worldwide in
replicating The Edmonton Protocol.

Family Relationships.
---------------------

     There are no family relationships between any of our directors or
executive officers.

Involvement in Certain Legal Proceedings.
-----------------------------------------

     During the past five years, none of our present or former directors,
executive officers or persons nominated to become directors or executive
officers:

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

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

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

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

Audit Committee.
----------------

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

     Compensation Committee.
     -----------------------

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

     Nominating and Corporate Governance Committee.
     ----------------------------------------------

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

Code of Ethics.
---------------

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

Item 10. Executive Compensation.
         -----------------------

Cash Compensation.
------------------

     The following table shows the aggregate compensation that we have paid to
our directors and executive officers for services rendered during the periods
indicated:

                    SUMMARY COMPENSATION TABLE


                           Long Term Compensation

                    Annual Compensation   Awards  Payouts

(a)             (b)   (c)   (d)   (e)   (f)   (g)   (h)    (i)

                                              Secur-
                                              ities        All
Name and   Year or               Other  Rest- Under- LTIP  Other
Principal  Period   Salary Bonus Annual rictedlying  Pay- Comp-
Position   Ended      ($)   ($)  Compen-Stock Optionsouts ensat'n
-----------------------------------------------------------------
Thomas C.
Drees, Ph.D,12/31/05    *     0     0     0      *     0   0
MBA, CEO,   12/31/04    *     0     0     0      *     0   0
President   12/31/03    0     0     0     0      0     0   0
and Chairman
of the Board

David E.
Nelson, CPA 12/31/05    *     0     0      0     *     0   0
CFO and     12/31/04    *     0     0      0     *     0   0
Director    12/31/03    0     0     0      0     0     0   0

Edward L.
Kunkel, Esq.12/31/05    *     0     0     0      *     0   0
Director    12/31/04    *     0     0     0      *     0   0
            12/31/03    0     0     0     0      0     0   0

                *   Commencing with the quarter ended December 31, 2004,
                    members of our Board of Directors will be paid 12,500
                    shares of common stock per quarter for all services
                    rendered to us in lieu of employment contracts.  See
                    Part III, Items 12 and 13, below.

Bonuses and Deferred Compensation.
----------------------------------

    See the heading "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" below.

Compensation Pursuant to Plans.
-------------------------------

     See the heading "Compensation of Directors" below.  Also see the heading
"Compensation Pursuant to Plans" in Part II, Item 5, above.

Pension Table.
--------------

     None; not applicable.

Other Compensation.
-------------------

     Other than as discussed below under the heading "Compensation of
Directors," we have no other compensation arrangements with any of our
directors or executive officers or our Advisory Board and Applications
members.

Compensation of Directors.
--------------------------

     With the exception of Jonathan Lakey, Ph.D., all directors, executive
officers and Medical Advisory Board Members will be paid of 50,000 shares of
our common stock per year, in quarterly issuances.

     Jonathan Lakey, Ph.D. will be issued 50,000 shares of our common stock
per quarter.

Employment Contracts.
---------------------

    Except as stated above, there are no employment arrangements with our
directors or executive officers.

Termination of Employment and Change of Control Arrangements.
-------------------------------------------------------------

     We have no special arrangements involving any change of control of our
company or termination of any director, executive officer or Medical Advisory
and Applications Board member.

Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------

     To our knowledge, during our past fiscal year and since then, all filings
required to be made by members of management or others pursuant to Section
16(a) of the Exchange Act, have been duly filed.  However, the following
filings were filed later than their due dates by our directors, executive
officers or 5% stockholders:

                                            Date Report        Date Report
Filer                 Transaction               Due               Filed
-----                 -----------               ---               -----
David E. Nelson       Disposal of               10/27/04         04/18/05
CPA                     110,000 shares
Director, CFO,        Acquisition of            04/13/05         04/18/05
Secretary/Treasurer      25,000 shares
                      Disposal of               01/05/05         04/18/05
                        246,627 warrants

Edward L. Kunkel      Acquisition of            04/13/05         04/19/05
Esq.                     25,000 shares
Director

Thomas C. Drees       Acquisition of            04/13/05         04/19/05
Ph.D.                    25,000 shares
Director and President Disposal of              12/22/04         04/19/05
                        205,000 shares

Item 11. Security Ownership of Certain Beneficial Owners and Management.
         ---------------------------------------------------------------

     The following tables set forth the share holdings of our directors and
executive officers and those persons who own more than five percent of our
common stock as of the date of the Annual Report:

                     DIRECTORS AND EXECUTIVE OFFICERS
                     --------------------------------

                                         Number of Shares        Percent
Name and Address                        Beneficially Owned       of Class*
----------------                        ------------------       --------
Thomas C. Drees, Ph.D., MBA                   40,253,133            49.9%
101 East Green Street, #11
Pasadena, California  91105

David E. Nelson, CPA                             504,294              .0062%
528 14th Avenue
Salt Lake City, Utah  84103

Edward L. Kunkel, Esq.                           300,000              .0037%
16 N. Marengo Ave, #517
Pasadena, California  91103
                                               ---------            -----
All directors and officers as a group         41,057,427            50.9%
(three persons)

               * Based upon 80,708,658 shares of outstanding common stock.

                         FIVE PERCENT STOCKHOLDERS
                         -------------------------
                                         Number of Shares         Percent
Name and Address                        Beneficially Owned       of Class *
----------------                        ------------------       --------
Thomas C. Drees, Ph.D., MBA                   40,253,133            49.9%
101 East Green Street, #11
Pasadena, California  91105
                                              ----------            -----
Total of all five percent                     40,253,133            49.9%
stockholders

               * Based upon 80,708,658 shares of outstanding common stock.

Changes in Control.
-------------------

     To our knowledge, there are no present arrangements or pledges of our
securities that may result in a change in control of our Company.

Item 12. Certain Relationships and Related Transactions.
         -----------------------------------------------

Transactions with Management and Others.
----------------------------------------

     Related party payables at December 31, 2005, and 2004, represents amounts
owed to our officers for reimbursement of expenses paid of $4,000.

     During the year ended December 31, 2004, we authorized the issuance of an
aggregate of 32,777,266 shares of our common stock for: (i) the cancellation
of certain debts in the amount of $1,313,144, and (ii) the contribution to the
capital of accrued salary and interest on debt by members of management in the
amount of $1,327,630.  An additional 3,280,000 shares of common stock were
authorized to be issued for services rendered to us.  The issuance of these
shares is reflected in our financial statements.

     In addition, two convertible notes payable in the aggregate amount of
$28,750, plus accrued interest, were converted into 773,902 shares of our
common stock.  The issuance of these shares is also reflected in our financial
statements.

     Except as indicated above, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which
our Company was or is to be a party, in which the amount involved exceeded
$60,000 and in which any director or executive officer, or any security holder
who is known to us to own of record or beneficially more than five percent of
our common stock, or any member of the immediate family of any of the
foregoing persons, or any promoter or founder had a material interest.

Certain Business Relationships.
-------------------------------

     Except as outlined above, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which
our Company was or is to be a party, in which the amount involved exceeded
$60,000 and in which any director or executive officer, or any security holder
who is known to us to own of record or beneficially more than five percent of
our common stock, or any member of the immediate family of any of the
foregoing persons, or any promoter or founder had a material interest.

Indebtedness of Management.
---------------------------

     Except as outlined above, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which
our Company was or is to be a party, in which the amount involved exceeded
$60,000 and in which any director or executive officer, or any security holder
who is known to us to own of record or beneficially more than five percent of
our common stock, or any member of the immediate family of any of the
foregoing persons, or any promoter or founder had a material interest.

Parents of the Issuer.
----------------------

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

Transactions with Promoters.
----------------------------

     Except as outlined above, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which
our Company was or is to be a party, in which the amount involved exceeded
$60,000 and in which any director or executive officer, or any security holder
who is known to us to own of record or beneficially more than five percent of
our common stock, or any member of the immediate family of any of the
foregoing persons, or any promoter or founder had a material interest.

Item 13. Exhibits and Reports on Form 8-K.
         ---------------------------------

Reports on Form 8-K.
--------------------

     See below for Exhibits that are incorporated herein by reference.

Exhibits Incorporated by Reference.*
------------------------------------
          (i)
                                          Where Incorporated
                                            in this Report
                                            --------------
8-K Current Report dated September        Part I, Item 1
29, 2004**

8-K Current Report dated November           Part I, Item 1
17, 2004**

Definitive Information Statement            Part I, Item 4
filed December 23, 2005

10-KSB for the fiscal year ended            Part I, Item 1
December 31, 2004**

          (ii)

Exhibit
Number               Description
------               -----------
3.2           Articles of Amendment increasing the authorized shares-
              Definitive Information Statement filed 12/23/2005**

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

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

23.1          Consent of HJ & Associates

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.

Item 14.  Principal Accountant Fees and Services.
          ---------------------------------------

     The following is a summary of the fees billed to us by our
principal accountants during the calendar years ended December 31, 2005, and
December 31, 2004:

     Fee category                      2005           2004
     ------------                      ----           ----

     Audit fees                        $14,100        $23,500

     Audit-related fees                $     0        $     0

     Tax fees                          $     0        $     0

     All other fees                    $     0        $     0

     Total fees                        $14,100        $23,500

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

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

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

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

                                SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Annual Report has been signed below by the following persons
on behalf of the Company and in the capacities and on the dates indicated:

                                       SANGUINE CORPORATION




Date: 3/30/2006                      By /s/ Thomas C. Drees
      ---------------                    -------------------------------------
                                         Thomas C. Drees, Ph.D., MBA
                                         CEO, President and Chairman of the
                                         Board of Directors

Date: 3/30/2006                      By /s/ David E. Nelson
      ---------------                   -------------------------------------
                                        David E. Nelson, CPA
                                        CFO and Director
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