<PAGE>




































             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, 1998

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

     For the transition period from _____________ to ____________

                   Commission File No. 0-24480


                       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, #11
                    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 Issuer (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 Company 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 files 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 Company'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.  [ ]

State Issuer's revenues for its most recent fiscal year: December 31, 1998 - 
$0

     State the aggregate market value of the voting stock 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.  

     April 4, 1999 - $7,861.99.  There are approximately 7,861,992 shares of
common voting stock of the Company held by non-affiliates.  During the past
two years there has been no "established public market" for shares of common
voting stock of the Company, so the Company has arbitrarily valued these
shares based on $0.001 par value per share.

           (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 Issuer's
classes of common equity, as of the latest practicable date:

                          April 4, 1999

                            23,010,217

          
               DOCUMENTS INCORPORATED BY REFERENCE

          A description of "Documents Incorporated by Reference" is contained
in Item 13 of this report.

Transitional Small Business Issuer Format   Yes  X   No ___

<PAGE>

                              PART I

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

          For a discussion of the business development of the Company from
inception to the end of the calendar year ended December 31, 1997, see its
Annual Report on Form 10-KSB for the calendar year ended December 31, 1997,
filed on April 21, 1998, which is incorporated herein by this reference.  See
Item 13 of this Report.

Business.
---------

          The Company, through its majority-owned subsidiary, Sanguine
Corporation, a California corporation ("Sanguine California"), is engaged in
the development of a synthetic red blood cell product called "PHER-O2." 
PHER-O2  is a second generation version of Fluosol, the only FDA-approved 
synthetic blood product to date.  The development of this product presently
comprises its sole business operations.  PHER-O2 is composed of perfluoro-
decalin molecules (i.e., synthetic red blood cells), purified water and a
proprietary, synthetic, fluorinated surfactant to hold the emulsion together. 
Perfluoro-decalin has great oxygen-carrying capacity, yet its particle can be
as much as 900 times smaller than a red blood cell.  Management believes that
PHER-O2 may carry three to four times the oxygen of human blood per unit
volume. This increased oxygen-carrying capacity may make PHER-O2 useful in the
treatment of heart attacks, strokes, cancer and other diseases for which
increased oxygenation is beneficial.  Furthermore, the Company believes that
perfluoro-decalin may be effective as an imaging agent in X-ray imaging,
nuclear magnetic resonance (NMR) imaging and CAT scans, without side effects. 
Management also believes that PHER-O2 has several other advantages over human
blood:  it may be sterilized to be free of disease; is believed to have the
quality of a universal match for all blood types; may be mass-produced; and
may be stored much longer than human blood.

          Battelle Memorial Institute was retained to assist the Company in
completing the emulsion of perfluoro-decalin and the synthetic surfactants
that make up PHER-O2.  The Company needs to obtain substantial additional
funding, as to which no assurance can be given.  If the Company obtains such
funding it is anticipated that on completion of the
compounding of PHER-O2, Battelle Memorial Institute will perform initial gross
animal tests, which do not require regulatory approval prior to commencement;
however, the data gathered from any such tests will be subject to regulatory
review in the future.  The Company anticipates that it will manufacture
experimental doses of PHER-O2 required to conduct gross animal testing.  

          In its second phase of operations, management intends to continue
developing the perfluorocarbon compounds in PHER-O2 in order to optimize its
quality, and expects to begin animal safety and efficacy trials in accordance
with guidelines of the United States Food and Drug Administration ("FDA") and
comparable foreign regulatory requirements.  

          In the final phase of the Company's proposed business operations, it
intends to complete its United States testing of PHER-O2, receive all
necessary FDA approvals and begin American and Canadian sales for cancer
treatment and angioplasty; and complete overseas testing, begin overseas sales
and begin the construction of manufacturing facilities.  Sanguine California
has previously licensed BioLogix to manufacture and market PHER-O2 in Canada,
including any future Canadian patent rights, and the exclusive right to market
PHER-O2 in U.S. military pre-hospital markets.  In this final phase, the
Company also intends to continue trials to test PHER-O2  for other
applications, including transplant organ preservation and the treatment of
carbon monoxide poisoning, sickle cell anemia, heart attack, stroke and
transfusions.  The Company will be required to conduct similar rigorous
testing and clinical trials of PHER-O2 for each desired application for which
it is sought to be used.  

          PHER-O2 is still in the research and development stage.  It has not
been tested on animals or humans; nor has any application been submitted to
any federal, state or foreign agency to seek authority for such testing.  This
development process will be time consuming, costly, subject to extreme
governmental regulation and must prove that this product is safe and
efficacious for human use.  Until then, the Company will have no potential for
revenues from operations.  No assurance can be given that the Company will be
able to raise the capital it will need to develop PHER-O2, or that if
sufficient funds are raised, that the Company will ever receive requisite
federal, state or foreign agency approval to manufacture or market this
product.  See the captions "Principal Products or Services and their Markets,"
"Competition," "Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts" and "Governmental Approval of Principal
Products or Services" of this Item. 

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

          The Company has only one product, PHER-O2, which is still in the
research and development stage.   The Company's success hinges solely on the
success of this product, as to which no assurance can be given.  PHER-O2 is
made up of perfluoro-decalin (a type of perfluorocarbon that is harmless to
humans and the atmosphere), purified water and a proprietary surfactant to
hold the emulsion together.  Perfluoro-decalin gives the product its oxygen
carrying ability.  The surfactant is non-toxic and, being fluorinated, helps
increase PHER-O2's oxygen carrying capacity and emulsion stability.  Sanguine
believes that the unique chemical nature of PHER-O2 will make it ideal for
many medical applications; each such application will be subject to the same
types of rigorous testing, clinical trials and regulatory approval process.

          PHER-O2 is believed to have the following advantages over human
blood:
     
          1.   May carry three to four times the oxygen of human blood per
unit;

          2.   Free of HIV, hepatitis and other blood-borne disease;

          3.   Universal match for all blood types;

          4.   May be mass-produced;

          5.   May have a three-year shelf life;

          6.   May be stored at room temperature; 

          7.   Has controllable circulatory half-life; and

          8.   1/900th the size of a red blood cell.

          9.   PHER-O2 is a second generation drug from Fluosol-DA, the only
synthetic red blood cell approved by the Food and Drug Administration, which
was done under Dr. Drees' management.

          The Company believes that these unique qualities may make PHER-O2
ideal for blood transfusions and numerous other medical applications,
including nuclear magnetic resonance imaging, CAT scans, cardioplegia (i.e.,
the priming of heart-lung machines in open heart surgery) and treatment of
heart attacks, strokes, head and neck tumors and hemorrhagic shock.  The
Company intends to fully exploit the immense worldwide market for these
applications.

          Blood transfusion represents a vast market for synthetic blood.  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 Company hopes to fill this need with PHER-O2.  The key
ingredients in PHER-O2 are readily available in the U.S. from many
manufacturers.  When combined in the Company's proposed factory, using the
Company's proprietary emulsion process, 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 it is believed 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.

          As HIV, hepatitis 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 percent effective method for
detecting blood-borne disease 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.

          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 900 times smaller
than human red blood cells.  The Company 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 the Company's erstwhile competitors has obtained FDA approval
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 has announced that it will no
longer manufacture its product, leaving Sanguine well-positioned in this
market segment.  See the caption "Competition" of this Item.

          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 to mechanically
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. 
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.
                                             
          Finally, the perfluoro-decalin molecule in PHER-O2 works as a
radiopaque agent in X-ray imaging and as a contrast agent in nuclear magnetic
resonance (NMR) imaging and CAT scans.  However, unlike many
currently-available imaging agents, PHER-O2 has no known side effects. 

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

          Several other companies, both domestic and foreign, are working to
develop alternatives to human blood.  They include:  Alliance Pharmaceutical
Corporation (San Diego, California); Baxter International (Deerfield,
Illinois); Biopure Corporation (Boston, Massachusetts); and Northfield Labs
(Chicago, Illinois).  These competitors are involved in the development of a
wide variety of human blood substitutes, including synthetic compounds,
recycled human blood and recombinant hemoglobin.  Neither the list of
competitors nor the list of human blood substitutes is exhaustive. 
Furthermore, some of the Company's existing or potential competitors have
significantly greater technical and financial resources than the Company and
may be better able to develop, test, produce and market products.  These
competitors may develop products that are competitive with or better than the
Company's product and that may render the Company's product obsolete.  The
Company can provide no assurance that it will be able to compete successfully.

Alliance, Baxter and Biopure have failed their United States and European
human efficacy and clinical tests and also lost their strategic alliances with
pharmaceutical companies Hoechst, Johnson and Johnson, Eli Lilly and Upjohn. 
Somatogen Corporation failed its clinical tests and was merged into Baxter. 
Competitors have been working on their products for periods ranging from
thirty five to one hundred years.  For those companies working with outdated
human or cow's blood, there is a major shortage of raw material.

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

          The Company plans to purchase medical-grade perfluorocarbons and
surfactants from reliable vendors and to emulsify these ingredients in its own
facility.  Air Products and Chemicals, Inc., DuPont, PCR, Inc. and BNFL
Fluorochemicals, Ltd. are qualified medical grade perfluorocarbon vendors. 
Surfactants are available through numerous vendors.  Because intravenous
solutions plants are very expensive and FDA approval of such plants is a
lengthy process, the Company intends to hire a third party to package the
product in sterile plastic bags with intravenous sets attached.  Abbott
Laboratories, Baxter, McGaw, Fresenius and Kabi are a few of the companies
with the qualifications and capacity to perform this function; however, the
Company can provide no assurances that any of these ingredients or services
will be available or that they will be available at prices that are low enough
to make the Company's operations profitable.

          Most of the Company's potential competitors have a severe shortage
of raw materials, namely the outdated human blood or cow's blood that is
required to produce their products.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
----------------
 
          Assuming the Company's product is proven efficacious for one or more
applications and receives requisite regulatory approval, the Company's success
will depend in part on its ability to obtain patents, protect trade secrets
and avoid infringing the proprietary rights of others.  On September 28, 1992,
Sanguine California filed a patent application for the PHER-O2 surfactant and
micro-emulsion technology with the U.S. Patent Office and received patent
pending status on the same date.  The Company and Battelle Memorial Research
Institute have developed eight other proprietary synthetic blood compounds
using newly developed surfactants, for which the Company intends to file the
necessary patent applications.  However, the patent position of biotechnology
companies in general is highly uncertain and involves complicated factual and
legal questions.  The Company can provide no assurance that it will receive a
patent for PHER-O2 or any other property for which a patent is sought. Nor can
the Company provide any assurance that any issued patents will give it any
competitive advantage, that competitors' patents will not adversely affect the
Company's business, or that competitors will not develop similar products that
are beyond the scope of the Company's patents.

          On March 28, 1991, Sanguine California and BioLogix, entered into a
10-year License Agreement whereby Sanguine California granted to BioLogix
certain license rights to manufacture and market PHER-O2 (the "License
Agreement").  Under the License Agreement, as amended on September 28, 1991, 
Sanguine California granted to BioLogix the exclusive right to manufacture and
market PHER-O2 in Canada, including any future Canadian patent rights, and the
exclusive right to market PHER-O2 in U.S. military pre-hospital markets (i.e.,
non-hospital emergency markets such as ambulances, fire and rescue vehicles
and out-patient clinics).  The consideration for these rights was the payment
by BioLogix to Sanguine California of $100,000.  Since Sanguine California
will not have FDA approval until at the least 2002, this License Agreement
will lapse.

            The amended License Agreement also granted BioLogix the right to
purchase for $200,000 a "co-exclusive license" with Sanguine California to
market PHER-O2 in all American pre-hospital markets.  Only $50,000 of this
amount was paid and the right to purchase the co-exclusive license expired on
March 31, 1992.  Finally, the License Agreement, as amended, provided for the
payment of royalties equal to 10 percent of gross sales revenues for PHER-O2
by the party selling PHER-O2 pursuant to the License Agreement to the
non-selling party.  

          On December 9, 1993, the Company entered into an Agreement with
Battelle Memorial Institute, through its Battelle Columbus Operations (the
"Battelle Agreement"), for research and development of the use of surfactants
to form a stable microemulsion using the Company's perfluorocarbon for use as
a blood substitute.  Terms under the initial Battelle Agreement provided for
the payment of $62,500 by the Company for these services, and an additional
$162,500 under an extension dated April 7, 1994 (the "Battelle Extension"). 
The Company entered into an agreement with Battelle in June, 1998, for further
research on PHER-02 for $300,000 of additional development.  Battelle will
continue development only after receipt of each of five payments of $60,000. 
The last payment was received November 2, 1998.  Battelle is not conducting
any research and development activities pending receipt of further funding. 
The Company retains all rights to any inventions discovered; Battelle is
required to provide periodic reports to the Company and keep all information
confidential; and either party may terminate the Battelle Agreement on fifteen
days' written notice, and Battelle may terminate on ten days' written notice
of default in any payment due from the Company, unless payment is received. 
In the event of termination, Battelle is required to provide the Company with
all reports, materials or other deliverable items available as of such date.  

          Continued research and development of PHER-O2 will depend upon the
Company's receipt of substantial additional debt or equity funding, as to
which no assurance can be given.

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

          FDA and comparable foreign agencies require laboratory testing,
clinical testing and other costly and time-consuming procedures before
biomedical products such as PHER-O2 can be marketed.  To date, the Company has
not begun any of these procedures.  The Company's plan for obtaining FDA and
overseas approval of PHER-O2 is set forth under the caption "Plan of
Operation."

          The Company can provide no assurance that these testing procedures
will be successfully completed, that if completed, they will show PHER-O2 to
be safe and efficacious or that any required governmental approvals will be
obtained.  Accordingly, there can be no assurance that the Company will ever
be permitted to market PHER-O2 in the United States or most foreign countries. 
The same holds true for any other products that the Company may develop.  See
the caption "Effects of Existing or Probable Governmental Regulations" of this
Item.

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

          Regulation by governmental authorities in the United States and
foreign countries will significantly affect the Company's ability to
manufacture and market its product and to conduct its ongoing research and
product development activities.  The Company's only 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.  Further, ongoing
compliance with these requirements can require the expenditure of substantial
resources.  Any failure by the Company or its collaborators or licensees to
obtain, or delay in obtaining, required regulatory approvals would adversely
affect the marketing of the Company's product and its ability to derive
product or royalty revenue.

          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 ("IND"), which must be
approved before human clinical testing can begin.  No tests of any nature
whatsoever have yet 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
IND.  Further, each clinical study must be conducted under the auspices of an
independent IRB at the institution at which the study will be conducted.  The
IRB will consider, among other things, ethical factors, the safety of human
subjects and the possible liability of the institution. 

          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 (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 will be
undertaken to further evaluate clinical efficacy and to further test for
safety within an expanded patient population at geographically dispersed
clinical study sites.  Although the Company believes its product is
substantially different from other synthetic blood products, there can be no
assurance that the Company will not encounter problems in clinical trials
which will cause the Company to delay or suspend clinical trials.

          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 ("PLA"),
which must be approved before commercial sales may begin.  The Company must
also file an Establishment License Application ("ELA") which describes the
manufacturing process for the product and the facility at which the product
will be produced.  The FDA may respond to the PLA and the ELA by granting a
license for the manufacture of the product from a designated facility and
the commercial sale of the product or by denying the application if it finds
that the application does not meet the criteria for regulatory approval,
requires additional testing or information or requires post-marketing testing
and surveillance to monitor the safety of the Company's product if they do not
view the PLA as containing adequate evidence of the safety and efficacy of the
drug.  Notwithstanding the submission of such 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.  There can be no assurance that approval will be granted for
the Company's product or its proposed facilities on a timely basis, if at all.

          In addition to regulations enforced by the FDA, the Company 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 future federal, state and local
regulations.

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

          Management believes 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, management does not believe the Company will have any material
expenditures related to the cost of compliance with applicable environmental
laws, rules or regulations.

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

          In calendar years 1996, 1997 and 1998, the Company, through its
wholly-owned subsidiary, Sanguine Corporation, a California corporation
("Sanguine California"), expended a total of $370,451 on research and
development.  As neither the Company nor Sanguine California presently has any
customers, none of the cost of these activities was borne directly by
customers.

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

          The Company presently has three employees, Dr. Drees, Mr. Nelson and
and Mr. Hargreaves.  Dr. Drees and Mr. Hargreaves are employed full time. 
Once the development of PHER-O2 is completed and the Company commences initial
animal testing and manufacturing of this product for these tests, additional
employees will be required; the Company is unable to presently estimate the
exact number of employees it may need for these services; however, see the
caption "Plan of Operation."

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

          The Company leases approximately 970 square feet of office space
located at 101 East Green Street, Suite 11, Pasadena California, 91105, at a
base rent of $1600 per month.

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

         At a Special Meeting of the Company's Board of Directors, held
January 28, 1998, a majority of the Company's directors resolved to retain
counsel for the purpose of filing an action against Holomon J. Nicholas, II to
recover damages for breach of contract, fraud, breach of fiduciary duties.

         The Company filed its Complaint against Mr. Nicholas on February 9,
1998, in the Third Judicial District Court of the State of Utah, alleging
breach of contract, breach of fiduciary duties to the Company, breach of
contract and unjust enrichment, and seeking monetary damages and a preliminary
injunction against the sale of any of Mr. Nicholas' shares of the Company's
common stock.  The case was designated Case No. 980901338.

         The basis of the Company's complaint was Mr. Nicholas' agreement at
the time that he was engaged to serve as President that he would assist the
Company in raising at least $5,000,000 during the 18 months immediately
following his election and that he would not sell any shares of the Company's
common stock until he was successful in raising such funding.  In reliance on
these representations, the Complaint alleged that the Company caused 400,000
shares to be sold to Mr. Nicholas and Mr. Nicholas failed to perform his
duties under the agreement.

          On March 2, 1998, Mr. Nicholas filed with the Court his Answer and
Counterclaim, in which Mr. Nicholas denied the material allegations of the
Company's Complaint and alleging breach of contract\wrongful failure to
transfer certificates shares, breach of contract\failure to pay wages and
intentional interference with prospective economic relations.  Mr. Nicholas'
counterclaim sought damages in an amount to be shown at trial, together with
costs of court and attorney's fees and a declaratory judgment declaring the
rights of the parties with respect to Mr. Nicholas' sale and disposition of
his shares of the Company's common stock.
          
          On August 21, 1998, the parties executed a Settlement Stipulation
providing for Mr. Nicholas to deliver endorsed Certificate No. 101967,
representing 300,000 shares of the Company's common stock, for cancellation
and re-issuance of the shares as follows: 100,000 shares to the Company and
200,000 shares to Mr. Nicholas.  The Settlement Stipulation also required the
Company to instruct its transfer agent to allow the transfer of Mr. Nicholas'
shares without restriction, pursuant to the legal opinion of Mr. Nicholas'
counsel.  

          The terms of the Settlement Stipulation having been carried out, on
April 15, 1999, the parties filed with the Court a Joint Motion to Dismiss the
action.  The parties expect that the Court will enter an Order thereon shortly
after the date of filing of this Report.
 
Item 4.  Submission of Matters to a Vote of Security Holders.
         ----------------------------------------------------

        None; not applicable.

                                  PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.
         ---------------------------------------------------------

Market Information
------------------

          Until the quarter ended June 30, 1994, and for at least five years
previously, there had been no "public market" for the shares of common stock
of the Company.  The Company's 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; however, there is no "established
trading market" in these shares of common stock. 

          The range of high and low bid quotations for the Company's
common stock during the each quarter of the year ended December 31, 1997 and
each quarter of the calendar year ended December 31, 1998, is shown below. 
Prices are inter-dealer quotations as reported by the NASD  and do not
necessarily reflect transactions, retail markups, mark downs or commissions.

<TABLE>
<CAPTION>
                             STOCK QUOTATIONS*

                                                  BID

Quarter ended:                          High                Low
--------------                          ----                ---

<S>                                     <C>                 <C>

March 31, 1997                          7/16                1/4  

June 30, 1997                           3/8                 7/32

September 30, 1997                      13/32               3/16

December 31, 1997                       13/32               3/16

March 31, 1998                          17/32               1/8

June 30, 1998                           1-3/32              1/4

September 30, 1998                      3/4                 5/32

December 31, 1998                       11/32               5/32

</TABLE>

          *    The future sale of presently outstanding "unregistered" and     
               "restricted" common stock of the Company by present members of  
               management and persons who own more than five percent of the    
               outstanding voting securities of the Company may have an        
               adverse effect on any market that may develop in the shares of  
               common stock of the Company.

Holders
-------

          The number of record holders of the Company's common stock as of
March 24, 1999, was approximately 462.

Dividends
---------

          The Company has not declared any cash dividends with respect to its
common stock, and does not intend to declare dividends in the foreseeable
future.  The present intention of management is to utilize all available funds
for the development of the Company's business.  There are no material
restrictions limiting, or that are likely to limit, the Company's ability to
pay dividends on its common stock.

Recent Sales of Unregistered Securities.
----------------------------------------

          On October 22, 1998, the Company issued 600,000 "unregistered" and
"restricted" shares of its common stock to Sun Rise Financial, Inc., an
unaffiliated entity, in consideration of $60,000.  The Company relied on the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended,
in connection with this transaction.

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

Plan of Operation.
------------------
          
          The Company's proposed plan of operation is composed of three
"phases," each of which coincides with a specific milestone in the process of
developing PHER-O2.  These phases (which will begin subject to available
funding), and the projected cost of each phase, are as follows:

          Phase I (approximately one year): In the first six months, the       
          Company plans to complete the development of perfluoro-decalin and   
          the synthetic surfactants that make up PHER-O2, manufacture          
          experimental doses and perform preliminary animal tests in           
          accordance with FDA and overseas regulations.  In the second six     
          months, the Company intends to continue developing the               
          perfluorocarbon compounds in PHER-O2 in order to produce optimal     
          qualities and to conduct animal safety and efficacy trials in        
          accordance with FDA and overseas requirements. During the course of  
          Phase I, the Company estimates that its increased technical,         
          administrative, sales/marketing and manufacturing requirements will  
          necessitate the hiring of a few additional employees.

          Phase II (approximately one year):  In the third year, the Company   
          intends to prepare Investigational New Drug applications for FDA and 
          European approval, conduct trials for cardioplegia, cancer treatment 
          and cardiology treatment in the United States and conduct            
          transfusion trials offshore.  During this period, the Company also   
          plans to submit license applications for transfusion with overseas
          authorities, begin production of PHER-O2 itself or with its          
          subcontractors and submit a New Drug Application for PHER-O2 in the  
          United States.  During the course of Phase II, the Company estimates 
          that it will need to hire a few additional employees.

          Phase III (approximately one year):  In the third year, the        
          Company plans to complete overseas testing of PHER-O2, begin sales   
          in Europe and other overseas areas that may have approved PHER-O2 by 
          this time and may begin construction of its  facility for            
          manufacturing, storing, inspecting and shipping PHER-O2.  During the 
          course of Phase III, the Company estimates that it will need to hire 
          additional employees.  During the third year, the Company plans to
          complete testing of PHER-O2 in the United States and receive all     
          necessary FDA approvals and begin American and Canadian sales for    
          cancer treatment and angioplasty.  During this period, the Company   
          also plans to complete construction of its manufacturing facility    
          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.  During the
          course of the third year, Phase III, the Company estimates that it   
          will need to hire additional employees.

          The foregoing cost estimates are based on the prior experiences of
Dr. Thomas C. Drees, the Company's CEO, President and Chairman of the Board of
Directors.  Dr. Drees has more than 25 years' experience in the blood
industry.  See the caption "Business Experience" of Part I, Item 5. 

          The Company's Plan of Operation for the next twelve months is to
begin Phase I of its business plan; i.e., to complete the synthesis of the
PHER-O2 surfactant and its emulsion with perfluoro-decalin, to manufacture
experimental doses of PHER-O2 and to perform preliminary animal tests in
accordance with FDA and comparable foreign overseas regulations.  The ability
to commence and to carry out this plan is dependent upon the Company's ability
to obtain substantial equity or debt financing, as to which no assurance can
be given. 

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

          Revenues for the calendar years ending December 31, 1998 and 1997,
were $0 and $0, respectively.

          The Company realized a net loss from operations of $366,439 (a loss
of $0.02 per share) during the calendar year ended December 31, 1998, and a
net loss from operations of $166,212 (a loss of $0.01 per share) for the year
ending December 31, 1997.

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

          During the calendar year ended December 31, 1998, the Company had
expenses of $366,439, while receiving $0 in revenues; the Company received
no revenues, and had total expenses of $166,212 during the calendar year ended
December 31, 1997.

          The Company is currently unable to pay its debts as they become due. 
These debts include three notes payable, totaling approximately $135,450,
which the Company is now unable to pay.  The continuation of the Company's
proposed business operations are subject to the ability of the Company to
raise substantial additional funding, as to which no assurance can be given.

Year 2000
---------

          The use of computer programs that rely on two-digit date codes to
perform computations or decision-making functions has become widespread.  Many
of these programs may fail as a result of their inability to properly
interpret date codes beginning on January 1, 2000.  For example, such programs
may interpret the year code "00" as the year 1900, rather than 2000.

          The Company has ceased its research and development activities
pending the receipt of the additional funding required by Battelle.  At
present, the Company's computer operations are limited to word processing,
which is not believed to be highly susceptible to Year 2000 issues.  However,
the Company can provide no assurance that the systems of other entities such
as banks and utilities will be modified on a timely basis, or that such an
entity's failure to properly modify its systems will not have an adverse
effect on the Company.

Item 7.  Financial Statements.
         ---------------------
                              
          Financial Statements for the years ended
          December 31, 1998, and December 31, 1997                    

          Independent Auditors Report                               

          Balance Sheet - December 31, 1998 and 1997                

          Statements of Operations Accumulated for the        
          Period January 18, 1989 to December 31, 1998
          and the Years ended December 31, 1998, 1997
          and 1996 

          Statements of Stockholders' Equity January 1,       
          1990 to December 31, 1998

          Statements of Cash Flows Accumulated for the        
          Period January 18, 1989 to December 31, 1998
          and the Years Ended December 31, 1998, 1997 
          and 1996

          Notes to Financial Statements                       

Item 8.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------

          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 current directors and
executive officers of the Company.  These persons will serve until the next
annual meeting of stockholders (held in June of each year) or until their
successors are elected or appointed and qualified, or their prior resignation
or termination.

<TABLE>
<CAPTION>

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

Anthony G. Hargreaves       Vice President         6/93              * 
                            Secretary/             6/93              *
                            Treasurer              6/93              *
                            Director               6/93              *
                            Chief Financial        6/94             3/96    
                            Officer

David E. Nelson, CPA        Director               3/96              *
                            Chief Financial        3/96              *
                            Officer
     
Edward L. Kunkel, Esq.      Director               4/94              *

</TABLE>

          * These persons presently serve in the capacities indicated opposite 
            their respective names.

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

Business Experience
-------------------

          Thomas C. Drees, Ph.D., MBA, CEO, President and Chairman of the
Board of Directors. Dr. Drees, age 70, 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 26 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.

          Anthony G. Hargreaves, Vice President, Secretary/Treasurer, and
Director.  Mr. Hargreaves is 71 years old.  He is a former Royal Marine
Officer with long experience in marketing, trust department banking (with Bank
of America) and group insurance sales management (with the Connecticut General
Life Insurance Company).  His medical background includes service as General
Manager of VK Limited in Pasadena, California, where Mr. Hargreaves helped
secure funding for a wearable, continuously-operating artificial kidney
machine.  In the early 1980's, Mr. Hargreaves organized and scripted
telemarketing sales of various products to retail stores throughout the United
States.

          David E. Nelson, CPA, Chief Financial Officer and Director.  Mr.
Nelson, age 56, 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.  Mr. Nelson has been a member of the NASD 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 52 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.  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
been a licensed real estate broker since 1979.
  
Family Relationships
--------------------

          There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.

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

          Except as indicated below, to the knowledge of management, during
the past five years, no present or former director, executive officer, or
person nominated to become a director or an executive officer of the Company:

          (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.

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

          The following table sets forth the aggregate compensation paid by
the Company for services rendered during the periods indicated:

<TABLE>
<CAPTION>


                                      SUMMARY COMPENSATION TABLE
<S>          <C>        <C>        <C>        <C>        <C>          <C>    <C>        <C>
                                                                  Long Term Compensation
                             Annual Compensation               Awards       Payouts
 
(a)          (b)        (c)        (d)        (e)        (f)          (g)  (h)        (i)
Name and     Year or                          Other      Restricted  Option\LTIP       All
Principal    Period     $          $          Annual     Stock        SAR's Payouts    Other
Position     Ended      Salary     Bonus      Compen-    Awards ($)   (#)   ($)      Compensa-    
             December                         sation($)                              tion ($)
             31
                    
Thomas C.      1997      (1)        -0-           -0-      -0-         -0-  -0-        -0-
Drees, Ph.D.   1998      (1)        -0-           -0-      -0-         -0-  -0-        -0-
MBA
CEO, President
and Chairman 
of the Board 
of Directors

Holomon J.     1997      $6,500     -0-           (2)      -0-         -0-  -0-        -0- 
Nicholas, II   1998      $-0-       -0-           -0-      -0-         -0-  -0-        -0-
Former Pres.,
COO and Dir.

Anthony G.     1997       (1)       -0-           -0-      -0-         -0-  -0-        -0- 
Hargreaves,    1998       (1)       -0-           -0-      -0-         -0-  -0-        -0-
Vice Pres.,
Sec./Treas.
and Director

David E.       1997      -0-        -0-           -0-      9,333(3)    -0-  -0-        -0-
Nelson, CPA    1998      -0-        -0-           -0-      -0-         -0-  -0-        -0-
CFO and
Director

Edward L.      1997      -0-        -0-           -0-      -0-         -0-  -0-        -0-
Kunkel, Esq.   1998      -0-        -0-           -0-      -0-         -0-  -0-        -0-
Director

</TABLE>

(1)   See the caption "Employment Contracts and Termination of Employment and  
      Change-in-Control Arrangements" of this Item.

(2)   The Board of Directors of the Company unanimously resolved on November   
      13, 1995, to issue 200,000 "unregistered" and "restricted" shares of the 
      Company's common stock to Mr. Nicholas if and when he was successful in  
      raising at least $5,000,000 in funding for the Company in the 12 to 18   
      month period following the date of the resolution, and an additional     
      200,000 "unregistered" and "restricted" shares to be issued to Mr.       
      Nicholas if and when he was successful in raising at least $10,000,000   
      in funding for the Company in the 12 to 18 month period following the    
      date of the resolution, all on satisfactory terms to the Board of        
      Directors of the Company. On September 24, 1996, the Board of Directors  
      resolved to amend this resolution to increase the total number of shares 
      to be issued to 500,000 "unregistered" and "restricted" shares, 250,000  
      shares upon satisfaction of the first contingency, and 250,000 shares    
      upon satisfaction of the second.  As of the date of this Report, 400,000 
      such shares have been issued to Mr. Nicholas, who has resigned as an     
      executive officer and director of the Company as previously disclosed in 
      this Report.  These shares were the subject of the recently settled      
      litigation filed by the Company against Mr. Nicholas.  See the heading   
      "Business" under the caption "Description of Business," Part I, Item 1,  
      and the caption "Legal Proceedings," Part I, Item 3 of this Report.

(3)   On November 21, 1997, the Board of Directors of the Company unanimously  
      resolved to issue 100,000 "unregistered" and "restricted" shares of      
      common stock to Mr. Nelson in consideration of services rendered, valued 
      at a total of $9,333.  See the heading "Business" Development" of the    
      caption "Business," Part I, Item 1 of this Report. 

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

          None.

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

          None.

Pension Table
-------------

          None; not applicable.

Other Compensation  
------------------

          None.

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

          Effective June 15, 1994, the Board of Directors, by unanimous
written consent pursuant to Section 78-315 of the Nevada Revised Statutes,
adopted, ratified and approved resolutions providing for payment of the sum of
$500 per month for service as a director of the Company.  This fee, at the
option of each director, may be paid in "unregistered" and "restricted" shares
of common stock of the Company. Directors shall also be reimbursed for direct
out-of-pocket expenses for attendance at meetings of the Board of Directors
and for expenses incurred for and on behalf of the Company.

          Due to lack of funding, the Company has not made any payments
pursuant to the above referenced resolutions.  No such payments will be made
until the Company has received substantial additional funding, as to which no
assurance can be given.

Employment Contracts
--------------------

          On January 22, 1990, Sanguine California entered into two Employment
Agreements, one with Dr. Thomas C. Drees for services as President, Chief
Executive Officer and Chairman of the  Board of Directors, and one with
Anthony G. Hargreaves for services as Vice President, Secretary/Treasurer and
Director (collectively, the "Employees").  The Employment Agreements provided
for the employment of the Employees for seven years, commencing on January 22,
1990 (the "Employment Term").

          In consideration of his exclusive service to Sanguine California,
each Employee was to receive the following:  (1) an adjustable base salary
(starting at $120,000 for Dr. Drees and $72,000 for Mr. Hargreaves); 
(2) inclusion in all incentive, stock option, 401(k) and similar plans, 
including one percent of Sanguine California's pre-tax profit; 
(3) entitlement to all perquisites that are available to employees of
similar station, including financial consulting, legal assistance
and security; (4) payment of all costs incurred in connection with the
Employees' maintenance of home offices, including qualified entertainment
expenses, business telephone charges and home security devices;
(5) payment of initiation fees, regular dues and expenses relating
to membership in a business, social or country club; (6)use of a 
new automobile of the Employee's choice, payment of all operating
expenses and automobile liability insurance; (7) reimbursement of
reasonable business expenses, including travel and entertainment;
(8) group life insurance equal to six times annual compensation and
accidental death and dismemberment equal to ten times annual
compensation; and (9) disability insurance providing for payments, in the
event of disability, until the Employee reaches age 70 (for Dr. Drees) or age
71 (for Mr. Hargreaves).  In addition, in the event of an Employee's death
during the Employment Term, Sanguine California agreed to pay to each
Employee's widow, designee or estate the Employee's base salary for the
remainder of the Employment Term.

          Neither of the Employment Agreements was enforced, and both
Employment Agreements were canceled by the Company's Board of Directors on
May 31, 1993. On September 23, 1993, the Board of Directors reinstated both
Employment Agreements for a seven-year period commencing on August 1, 1993.  

          On June 2, 1994, pursuant to a Letter Agreement addressed to the
Company and accepted by the Company on June 3, 1994, and adopted, ratified and
approved by written consent by persons owning a majority of the outstanding
voting securities of the Company pursuant to Section 78-320 of the Nevada
Revised Statutes (Dr. Drees, Mr. Hargreaves and A. Smith Associates were the
persons or entities signing the written consent), it was agreed that the
salaries provided in these Employment Agreements would not commence until June
1, 1994, and that no salaries had accrued or were payable under these
Employment Agreements prior to such date; that for the months of June, July
and August, 1994, the salaries payable under these Employment Agreements would
be one-fourth of the amounts provided therein; and that commencing September
1, 1994, the salaries payable under these Employment Agreements would be
one-half of the amounts provided therein, and would continue at such rate
until the Company shall have raised not less than the sum of $1,500,000 in
debt or equity financing, with all funds raised since the completion of the
Sanguine Plan being computed in arriving at the sum of $1,500,000 required to
be raised. 

          On September 24, 1996, the Board of Directors of the Company
resolved to issue to Mr. Hargreaves 529,358 "unregistered" and "restricted"
shares in consideration of services rendered over the previous six years.  See
Item 1 of this Report and the Summary Compensation Table of this Item.  As of
December 31, 1998, a total of $428,000 in salaries had accrued to Messrs.
Drees and Hargreaves pursuant to the above referenced Letter Agreement.

          The Company and Edward L. Kunkel, who is a director of the Company,
executed an Employment Agreement on June 1, 1994 (the "Kunkel Agreement"). 
The Kunkel Agreement provided for Mr. Kunkel to receive compensation equal to
$500 per month or $500 worth of the Company's "unregistered" and "restricted"
common stock, provided that no compensation was to be payable until such time
as the Company had received operating funds totaling at least $1,000,000
cash.  No such compensation has yet been paid due to the Company's inability
to obtain such funding.  The term of the Kunkel Agreement was one year from
the date of its execution, subject to renewal by the parties.  As of the date
of this Report, the Kunkel Agreement has not been renewed.

          The Kunkel Agreement further irrevocably granted to Mr. Kunkel the
option to purchase 10,000 "unregistered" and "restricted" shares of the
Company's common stock, exercisable in whole or in part until May 31, 1997. 
The price per share of these shares equals the average low bid price per share
as quoted on the OTC Bulletin Board of the NASD on June 1, 1994.  As of the
date of this Report, the option has not been exercised in whole or in part.
  
Termination of Employment and Change of Control Arrangements  
------------------------------------------------------------

          None.
          
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

          During the month ended December 31, 1998, David E. Nelson, the
Company's Chief Financial Officer, sold 20,000 shares of the Company's common
stock in a market transaction.  During the three month ended March 31, 1999,
which are subsequent to the period covered by this Report, Mr. Nelson sold an
additional 80,000 shares, also in market transaction.  On or about April 6,
1999, Mr. Nelson filed with the Commission Form 4 Statements of Changes in
Beneficial Ownership with respect to these transactions.  

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

          The following tables set forth the shareholdings of the Company's
directors and executive officers and those persons who own more than five
percent of the Company's common stock as of April 4, 1999, with the
computations being based upon 23,590,859 shares of common stock being
outstanding.  This figure takes into account the 23,010,217 presently
outstanding shares of common stock; the 470,642 shares subject to an existing
option held by Anthony G. Hargreaves (see footnote 2 below); the 10,000 shares
subject to an existing option held by Edward L. Kunkel, Esq. (see footnote 3
below); and the 100,000 shares subject to an existing option held by
Leonard W. Burningham, Esq. (see the financial statements hereto):


                     DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>

                                         Number of Shares        Percent
Name and Address                        Beneficially Owned       of Class
----------------                        ------------------       --------

<S>                                          <C>                   <C>

Thomas C. Drees, Ph.D, MBA (1)               12,219,133            51.8%
101 East Green Street, #11
Pasadena, California  91105

Anthony G. Hargreaves (1)                     1,470,642(2)          6.2%
101 East Green Street, #11
Pasadena, California  91105

David E. Nelson, CPA(1)                             150             -0- 
528 14th Avenue
Salt Lake City, Utah  84103

Edward L. Kunkel, Esq. (1)                       60,000 (3)         0.3%
39 East Union Street
Pasadena, California  91103                   __________            ______

</TABLE>

All directors and officers as a group        13,849,925            58.7%
(4 persons)

          (1)   See Part I, Item 5, below, for information concerning the     
                offices or other capacities in which the foregoing persons    
                serve with the Company.

          (2)   Includes an option to acquire 470,642 shares of "unregistered" 
                and "restricted" common stock of the Company at a price of     
                $0.1275 per share, exercisable until September 22, 2001.

          (3)   Includes an option to acquire 10,000 shares of "unregistered"  
                and "restricted" common stock of the Company at a price equal  
                to the average low bid price per share of the Company's common 
                stock as quoted on the OTC Bulletin Board of the NASD on June  
                1, 1994, the date of the Employment Agreement granting such    
                option.  This option was exercisable in whole or in part until 
                May 31, 1997, and the Company has expressed its intention to   
                extend this option until May 31, 1999.  See the caption        
                "Employment Contracts" of Part III, Item 10 of this Report.

                         FIVE PERCENT STOCKHOLDERS

<TABLE>
<CAPTION>

                                         Number of Shares         Percent
Name and Address                        Beneficially Owned       of Class
----------------                        ------------------       --------

<S>                                         <C>                   <C>
Thomas C. Drees, Ph.D, MBA                  12,219,133            51.8%
101 East Green Street, #11
Pasadena, California  91105

A. Smith Associates(4)                       1,110,000             4.7%
455 East 500 South, #201
Salt Lake City, Utah  84111

A.K.S., Inc.(5)                                100,000             0.4%
455 East 500 South, #201
Salt Lake City, Utah  84111

Karl Smith                                     188,300             0.7%
455 East 500 South, #201
Salt Lake City, Utah 84111                     _______            ______

                                            13,617,433            57.6%

</TABLE>

          (4)  A. Smith Associates is a Utah corporation, the majority
               of which is owned by Karl Smith of Salt Lake City, Utah.

          (5)  A.K.S., Inc. is a Utah corporation, the majority of which is    
               owned by Karl Smith of Salt Lake City, Utah.

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

          To the knowledge of the Company's management, there are no present
arrangements or pledges of the Company's securities which may result in a
change in control of the Company.

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

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

          During the past two years, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000 and in which any director or executive
officer, or any security holder who is known to the Company to own of record
or beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.

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

         During the past two years, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000 and in which any director or executive
officer, or any security holder who is known to the Company to own of record
or beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.

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

          During the past two years, there have been no material transactions,
series of similar transactions or currently proposed transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000 and in which any director or executive
officer, or any security holder who is known to the Company to own of record
or beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.

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

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

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

          During the past two years, there have been no material transactions,
series of similar transactions, currently proposed transactions, or series of
similar transactions, to which the Company or any of its subsidiaries was or
is to be a party, in which the amount involved exceeds $60,000 and in which
any promoter or founder, or any member of the immediate family of any of the
foregoing persons, had a material interest.

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

Reports on Form 8-K

          Current report on Form 8-K, dated November 3, 1998, filed November
10, 1998.

Exhibits*

          (i)
                                          Where Incorporated       
                                            in this Report         
                                            --------------  
      

Annual Report on Form 10-KSB for the            Part I
calendar year ended December 31, 1997,
filed April 15, 1998**


          (ii)                          
                                                   
Exhibit                                                
Number               Description                                               
------               -----------

 21       Subsidiaries of the Company**                        

 27       Financial Data Schedule

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

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


                                SIGNATURES

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

                                       SANGUINE CORPORATION


Date: April 13, 1999                  By /s/ Thomas C. Drees                   
      --------------                    -------------------------------------- 
                                        Thomas C. Drees, Ph.D., MBA
                                        CEO, President and Chairman of the     
                                        Board of Directors

          Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this 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: April 13, 1999                 By /s/ Thomas C. Drees              
      --------------                    -------------------------------------
                                         Thomas C. Drees, Ph.D., MBA
                                         CEO, President and Chairman of the    
                                         Board of Directors


Date: April 13, 1999                 By /s/ Anthony G. Hargreaves              
      --------------                    ------------------------------------- 
                                         Anthony G. Hargreaves, Vice           
                                         President, Secretary/Treasurer and    
                                         Director


Date: April 15, 1999                  By /s/ David E. Nelson                  
      --------------                     ------------------------------------ 
                                         David E. Nelson, CPA
                                         CFO and Director


    
<PAGE>
                           SANGUINE CORPORATION
                       (A Development Stage Company)

                           FINANCIAL STATEMENTS

                             December 31, 1998
                                     &
                             December 31, 1997
<PAGE>
                          Schvaneveldt & Company
                        Certified Public Accountant
                     275 East South Temple, Suite #300
                        Salt Lake City, Utah 84111
                              (801) 521-2392

Darrell T. Schvaneveldt, C.P.A.

                        Independent Auditors Report

Board of Directors
Sanguine Corporation
(A Development Stage Company)

I have audited the accompanying balance sheets of Sanguine Corporation, as of
December 31, 1998 and 1997, and the related statements of operations,
stockholders  equity, and cash flows for the accumulated period of January 18,
1989 to December 31, 1998, and the years ended December 31, 1998, 1997, and
1996.  These financial statements are the responsibility of the Company s
management.  My responsibility is to express an opinion on these financial
statements based on my audit. 

I conducted my audit in accordance with generally accepted auditing standards. 
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the  financial statements are free of material
misstatements.  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 the significant
estimates made by management, as well as evaluating the overall financial
statements presentation.  I believe that my audit provides a reasonable basis
for my opinion. 

In my opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of Sanguine Corporation, as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the accumulated period of January 18, 1989 to December 31, 1998, and
the years ended December 31, 1998, 1997, and 1996, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As discussed in Note #10 to the financial
statements, the Company has an accumulated deficit and a negative net worth at
December 31, 1998.  These factors raise substantial doubt about the Company s
ability to continue as a going concern.  Management s plans in regard to these
matters are also discussed in Note #10.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. 

/s/ Schvaneveldt & Company
Salt Lake City, Utah
March 13, 1999
<TABLE>
                           SANGUINE CORPORATION
                       (A Development Stage Company)
                               Balance Sheet
                        December 31, 1998 and 1997
<CAPTION>
                                             1998      1997 
                                  ASSETS
<S>                                         <C>        <C>
Current Assets
     Cash                                    $499      $     263 

Property & Equipment
     Furniture                                 84          1,004 
 
        TOTAL ASSETS                         $583      $   1,267 

                    LIABILITIES & STOCKHOLDERS  EQUITY
Current Liabilities
     Accounts Payable                   $  14,154      $  35,562 
     Accrued Salaries                     428,000        332,000 
     Accrued Interest Payable              33,420         27,960 
     Notes Payable                        135,450        103,700 

          Total Current Liabilities       611,024        499,222 

Stockholders  Equity
     Common Stock, Authorized:
       100,000 Shares at $0.001 Par Value:
       23,010,217 & 20,977,723 Shares
       Issued & Outstanding Respectively   23,010         20,977 
     Paid In Capital (Quasi-Reorganized 
       March 20, 1994 Deficit Retained 
       Earnings of $2,423,964 Eliminated) 858,096        606,176 
     Retained Earnings Deficit         (1,491,547)    (1,125,108)
     
         Total Stockholders  Equity    (  610,441)     ( 497,955)     

          TOTAL LIABILITIES & 
          STOCKHOLDERS  EQUITY         $      583      $   1,267 
</TABLE>
<TABLE>
                           SANGUINE CORPORATION
                       (A Development Stage Company)
                         Statements of Operations
     Accumulated for the Period January 18, 1989 to December 31, 1998
           and the Years Ended December 31, 1998, 1997 and 1996

<CAPTION>
                        Accumulated 
                           January 
                        18, 1989 to 
                          December  December  December  December 
                          31, 1998  31, 1998  31, 1997  31, 1996 
<S>                       <C>       <C>       <C>       <C>
Revenues
   Interest Income        $  4,842  $    -0-  $    -0-  $      3 
   Sales Market Rights     150,000       -0-       -0-       -0- 

          Total Revenues   154,842       -0-       -0-         3 

Expenses
   Depreciation           $  4,525  $    920  $    920  $    920 
   Research & Development  787,805   198,000    79,000    93,451 
   Insurance                 3,428       467       672       515 
   Office Expenses          81,938     9,585     8,987    15,035 
   Auto Expenses            18,812       990     1,170     1,080 
   Legal & Professional 
   Fees                    122,164    30,550     9,773     8,932 
   Rent                     84,440    17,596    16,000    14,622 
   Interest Expenses        53,081    16,732    10,255     6,603 
   Bad Debts                10,000       -0-    10,000       -0- 
   Travel                   18,015       136       -0-     1,318 
   Stock Transfer            4,529     1,770       618       882 
   Consultant Fees         297,520    63,710     9,633    45,780 
   Salaries & Wages         94,108    18,000    18,000    18,000 
   Taxes & Licenses         23,296     1,167     1,184       381 
   Finders Fees              7,825       -0-       -0-       -0- 
   Promotions               34,903     6,816       -0-     2,500 

         Total Expenses  1,646,389   366,439   166,212   210,019 

     Net Profit (Loss)
     From Operations   ($1,491,547)($366,439)($166,212)($210,016)

     Profit (Loss) 
     Per Share                     ($    .02) ($   .01)($    .01)

   Weighted Average Shares
     Outstanding                  21,943,900 20,877,723 19,946,773 
</TABLE>
<TABLE>
                           SANGUINE CORPORATION
                       (A Development Stage Company)
                     Statement of Stockholders  Equity
                   January 1, 1990 to December 31, 1998

                            Common    Shares   Paid In  Accumulated 
                            Shares    Amount   Capital   Deficit 
<S>                        <C>        <C>        <C>      <C>
Balance, January 1, 1990 
Retroactively Restated      1,428,364  $ 1,428  $2,423,214 ($2,464,642)

Balance, December 31, 1990  1,428,364    1,428   2,423,214 ( 2,464,642)

Net Profit Year Ended 
December 31, 1991                                               73,917 

Balance, December 31, 1991  1,428,364    1,428   2,423,214 ( 2,390,725)

Shares Issued for Services 
$0.001 Per Share                2,720        2 

Contributed Capital by Officer                         750 

Net Loss Year Ended 
December 31, 1992                                             ( 77,011)

Balance, December 31, 1992  1,431,084    1,430   2,423,964 ( 2,467,736)

Shares Issued to Acquire 94% 
of Outstanding Shares of 
Sanguine Corporation 
(A California Corporation) 14,589,775   14,590               (  14,590)

Shares Issued for Cash 
$.20 Per Share                500,000      500      99,500 

Shares Issued for Cash 
$1.00 Per Shares               10,000       10       9,990 

Net Loss Year Ended 
December 31, 1993                                             ( 92,895)

Balance, December 31, 1993 16,530,859   16,530   2,533,454  (2,575,221)

Quasi-Reorganization Restated 
of Equity Accounts                              (2,423,964)  2,423,964 

Cash Received of Exercise of 
Option to Purchase Shares at 
$.36 Per Share                175,000      175      62,825 

Cash Received from Sale of 
Stock at $.75 Per Share        16,000       16      11,984 

Net Loss Year Ended 
December 31, 1994                                             (230,779)

Balance, December 31, 1994 16,721,859   16,721     184,299    (382,036)

Shares Issued in Satisfaction 
of Accounts Payable at 
$0.17 Per Share               500,000      500      83,585 

Shares Issued in Satisfaction 
of Accounts Payable at 
$.05 Per Shares               700,000      700      31,238 

Shares Issued for Services 
at $.125 Per Share          1,625,000    1,625     201,500 

Shares Issued in Satisfaction 
Notes Payable at $.75 Per 
Share                          16,000       16      13,225 

Net Loss Year Ended 
December 31, 1995                                             (366,843)

Balance, December 31, 1995 19,562,859   19,562     513,847    (748,879)

Shares Issued for Cash 
$0.25 Per Share                10,000       10       2,490 

Shares Issue for Services
$0.001 Per Share              450,000      450 

Shares issued in Satisfaction 
of Accrued Expenses 
$0.25 Per Share               125,506      126      31,251 

Shares Issued In Satisfaction 
of Services Rendered $0.001 
Per Share                     529,358      529 

Shares Issued in Satisfaction 
of Accounts Payable $0.247 
Per Share                     200,000      200      49,354 

Rounding                                                      (      1)

Net Loss for Year Ended 
December 31, 1996                                             (210,016)

Balance, December 31, 1996 20,877,723   20,877     596,942    (958,896)

Shares Issued for Services    100,000      100       9,234 

Net Loss for Year Ended
December 31, 1997                                             (166,212)

Balance, December 31, 1997 20,977,723   20,977     606,176  (1,125,108)

Shares Issued for Services
$.025 Per Share                32,281       32       8,038 

Shares Issued for Services
$0.25 Per Share                31,183       31       7,766 

Shares Issued for Services
$0.25 Per Share                11,030       11       2,747 

Shares Issued in Satisfaction 
of Accounts Payable $0.21 
Per Share                     240,000      240      52,887 

Shares Issued for Cash $0.13 
Per Share                       8,000        8       1,192 

Shares Canceled              (100,000) (   100)        100 

Share Issued for Services at
$0.10 Per Share               600,000      600      59,400 

Shares Issued for Cash at 
$0.10 Per Share                10,000       10         990 

Shares Issued for Cash at
$0.10 Per Share             1,200,000    1,200     118,800 

Rounding Adjustment                          1 

Net Loss for Year Ended
December 31, 1998                                             (366,439)

Balance, December 31, 1998 23,010,217 $ 23,010  $  858,096 ($1,491,547)
</TABLE>
<TABLE>
                              SANGUINE CORPORATION
                         (A Development Stage Company)
                            Statements of Cash Flows
        Accumulated for the Period January 18, 1989 to December 31, 1998
              and the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
                                   Accumulated 
                                    January 
                                   18, 1989 to 
                                   December     December  December  December 
                                   31, 1998     31, 1998  31, 1997  31, 1996
<S>                             <C>            <C>        <C>      <C> 
Cash Flows from Operating Activities
 Net (Loss)                      ($1,491,547) ($366,439) ($166,212) ($210,016)
 Adjustments to Reconcile Net (Loss)
  to Net Cash:
  Rounding                              -0-   (       2)      -0-        -0- 
  Depreciation                         4,525        920        920        920 
  Non Cash Expense                   427,801     78,625     19,334     81,909 
 Changes in Operating Assets & 
 Liabilities:        
  Increase (Decrease)Accounts Payable 14,154     31,722     10,189    ( 2,253)
  Increase in Interest Payable        33,420      5,460      5,460      4,500 
  Increase in Accrued Salaries       428,000     96,000     96,000     96,000 
     Net Cash Flows from 
     Operating Activities           (583,647)  (153,714)  ( 34,309)  ( 28,940)

Cash Flows from Investing Activities
 Purchase of Equipment              (  4,609)      -0-        -0-        -0- 

Cash Flows from Financing Activities
 (Decrease) Increase in Notes 
 Payable                             135,450     31,750     33,900     26,400 
 Sale of Common Stock                452,555    122,200       -0-       2,500 
 Contributed Capital                     750       -0-        -0-        -0- 
   Net Cash Flows from 
   Financing Activities              588,755    153,950     33,900     28,900 

     Increase (Decrease) in Cash         499        236   (    409)      ( 40)
     Cash at Beginning of Period        -0-         263        672        712 
     Cash at End of Period          $    499   $    499   $    263   $    672 

Disclosure for Cash Flows from
 Interest                           $ 53,081   $ 16,732   $ 10,255   $  6,602 
 Taxes                                  -0-        -0-        -0-        -0- 

Disclosures from Non Cash Transactions
 Operating Activities 
 Payment of Accounts Payable        $   -0-    $ 49,930  $    -0-    $ 81,909 
 Issued Shares for Services             -0-      78,625      9,333       -0- 
</TABLE>
                           SANGUINE CORPORATION
                       (A Development Stage Company)
                       Notes to Financial Statements

NOTE #1 - Corporate History

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 stated purpose of the Company is to engage without qualification, in any
lawful acts, or activity for which a corporation may be organized under the
laws of the state of Nevada.  Currently,  the Company is engaged in developing
artificial blood to be used by the medical profession.  The Company is
conducting research and development leading to F.D.A. clinical trials. 

The Company forward split its outstanding shares 1.5 shares for 1 on July 14,
1993.  As a consequence of this action, the Company had 1,431,000 shares
issued and outstanding prior to the Agreement and Plan of Reorganization in
which Sanguine Corporation (a California Corporation) was acquired. 

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).

From 1974 to 1989, 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.  Sanguine Corporation (California) is
a development stage company and these financial statements are presented as
those of a development stage company effective January 18, 1989, coinciding
with the incorporation date of Sanguine Corporation (California).

NOTE #2 - Significant Accounting Policies

(A)  The Company uses the accrual method of accounting.
(B)  Revenues and directly related expenses are recognized in the period when
     the goods are shipped to the customer. 
(C)  The Company considers all short term, highly liquid investments that are
     readily convertible, within three months, to known amounts as cash
     equivalents.  The Company currently has no cash equivalents. 
(D)  Primary Earnings Per Share amounts are based on the weighted average
     number of shares outstanding at the dates of the financial statements. 
     Fully Diluted Earnings Per Shares shall be shown on stock options and
     other convertible issues that may be exercised within ten years of the
     financial statement dates.
(E)  Inventories:   Inventories are stated at the lower of cost, determined by
          the FIFO method or  market.
(F)  Depreciation:   The cost of property and equipment is depreciated over    
     the estimated useful lives of the related assets. The cost of leasehold
     improvements is depreciated (amortized) over the lesser of the length of
     the related assets or the estimated lives of the assets.  Depreciation is
     computed on the straight line method for reporting purposes and for tax
     purposes.
(G)  Estimates: The preparation of the financial statements in conformity with
     generally accepted accounting principles requires management to make
     estimates and assumptions that affect the amounts reported in the
     financial statements and accompanying notes.  Actual results could differ
     from those estimates.

NOTE #3 - Common Stock Public Offering

In June of 1974, the Company completed a public offering of 3,000,000 shares
of its common stock at $0.02 per share. 

NOTE #4 - Net Operating Losses for Tax Carryforward

The Company had net operating losses to carryforward to years expiring in
1985. Sanguine Corporation (California) has had operating losses to
carryforward as scheduled below. 

                      Year of            Expiration 
                         Loss    Amount      Date 
                         1992  $  3,094      2007 
                         1993   149,162      2008 
                         1995   186,779      2009 
                         1995   165,343      2010 
                         1996   209,488      2011 
                         1997   156,878      2012 
                         1998   366,439      2013 

The Company has adopted FASB 109 to account for income taxes.  The Company
currently has no issues that create timing differences that would mandate
deferred tax expenses.  Net operating losses would create possible tax assets
in future years.  Due to the uncertainty as to the utilization of net
operating loss carryforwards an evaluation allowance has been made to the
extent of any tax benefit that net operating losses may generate. 
                                        1998      1997      1996 
Current Tax Asset Value of Net 
Operating Loss Carryforwards at 
Current Prevailing Federal 
  Tax Rate                          $420,643  $296,053  $242,715 
Evaluation Allowance                (420,643) (296,053) (242,715)

     Net Tax Assets                 $    -0-  $    -0-  $    -0- 
     Current Income Tax Expense          -0-       -0-       -0- 
     Deferred Income Tax Expense         -0-       -0-       -0- 

NOTE #5- Notes Payable - Short Term
     
The Company has three notes payable to three entities.
                                                                   Amounts     
                                                                1998      1997 
     Note #1 to an individual, due on demand, interest at 10%
     per annum, with option to the holder to convert to 35,277 
     shares of common stock to $0.4252 per share.            $ 15,000 $ 15,000 

     Note #2 to a partnership, due on demand, but not later 
     than August 10, 1994, at 12% per annum interest.          25,000   25,000 

     Note #3 to an individual, (related party) due on demand,
     interest at 12% per annum.                                95,450   63,700 

     Total Current Notes Payable                             $135,450 $103,700 

NOTE #6 - Property & Equipment

The Company capitalized the purchase of equipment and fixtures for major
purchases in excess of $1,000 per item.  Capitalized amounts are depreciated
over the useful life of the assets using the straight-line method of
depreciation. 

Scheduled below are the assets, costs, lives, and accumulated depreciation at
December 31, 1998 and 1997. 
             December 31,                   Depreciation         Accumulated   
            1998    1997                      Expense            Depreciation  
Assets      Cost    Cost      Life   1998    1997   1998    1997 
Furniture        $ 4,609  $  4,609      5  $  920  $ 920  $4,525   $   3,605 

NOTE #7 - Stock Option

The Company has set aside 1,500,000 shares of its common stock options at a
price not to exceed $5.00 per share.  The Corporation has issued 893,449
warrants as follows:

     587,715 at $0.8504 per share.
     305,734 at $0.4252 per share.

The exercise period of warrants issued expired in August 1998 with no warrants
being exercised.

Pursuant to the Agreement and Plan of Reorganization dated June 14, 1993, the
Company issued an option to purchase 470,642 shares of its common stock at
$0.1275 per share.  The option has been extended by the Company and expires on
September 22, 2001.  The option issued by Sanguine Corporation (Nevada
Corporation) replaced options issued by the California Corporation to an
officer as part of his compensation for services.  When the option was issued
by the Company the shares of the Company had no market value. 

On November 10, 1995, the Company issued an option to its legal counsel for
200,000 shares at $.25 per share for a period of five years.  In 1996 and 1998
counsel exercised its option to purchase the 200,000 shares at $0.25 per
share. 

On September 23, 1998, the Company issued an option to its legal counsel for
100,000 shares at $0.25 per share for a period of three years from the date of
the grant.

NOTE #8 - Refundable Commitment Fee

The Company has advanced to a funding group in California $10,000 as a
refundable commitment fee.  The funding group proposes to obtain an investor
to commit up to $35,000,000 under a mutually agreed contract in exchange for
43% of the Corporation's stock.  Shares of Stock equal to 43% of the shares
outstanding have been placed in escrow.  The agreement was extended on a month
to month basis but expired in 1995.  At December 31, 1997, the Company
determined there would be no recovery of the loan fee and wrote if off.

NOTE #9 - Lease Commitment

The Company had a one year lease on its office facilities in California for
the period March 1, 1994 to March 1, 1995 at a total cost of $15,696.  The
Company continues to rent the office space at the monthly rate of $1,600 on a
month to month basis.

NOTE #10 - Going Concern

The Company has an accumulated deficit of $1,115,774 at December 31, 1997 and
negative cash flows for the year and the proceeding year then ended.  Until
the Company commences business operations, management anticipates that
negative cash flows will continue.  These factors raise substantial doubt
about the Company's ability to continue as a going concern.  The Company seeks
to find a business opportunity to acquire or merge with that will provide
operating capital. 

NOTE #11 - Minority Interest

Sanguine Corporation (California) had a total of 6,586,800 shares of its
common stock issued and outstanding.  Pursuant to the Agreement and Plan of
Reorganization, Sanguine Corporation (Nevada) acquired 6,200,000 of the issued
and outstanding shares.  The resulting 386,800 shares of minority interest in
the California Corporation represents approximately six percent (6%) of the
Company's outstanding stock.  No provision for minority interest has been made
on the financial statements because of the losses incurred in the presented
periods and the deficit stockholder's equity. 

NOTE #12 - Employment Agreement

The Company has employment agreements with Dr. Thomas Drees and Anthony G.
Hargreaves dated January 22, 1990.  The agreements call for a base salary of
$120,000 to Dr. Drees and $72,000 to Mr. Hargreaves annually.  Insurance
benefits, home office reimbursement, and an automobile are to be provided by
the Company and reimbursement for out of pocket expenses will be paid to Dr.
Drees and Anthony G. Hargreaves.  Subject to an agreement of June 2, 1994, Dr.
Drees and Mr. Hargreaves agreed to cancel all outstanding accruals for
expenses under the provision of the Agreements and to accept as full
satisfaction of all of their claims against Sanguine Corporation the payments
they received in November 1993.  In addition the Agreements were modified to
provide that for June, July, and August of 1994, salary shall be paid at one
fourth the amount specified by the Agreements.  Commencing September 1, 1994,
Dr. Drees and Mr. Hargreaves will be entitled to receive one half the salary
specified until such time as Sanguine Corporation shall have raised $1,500,000
in debt or equity funding.   All funds raised since the completion of the
Agreement and Plan of Reorganization between Sanguine Corporation
(California), and Sanguine Corporation (Nevada), are being counted in arriving
at this sum.

NOTE #13 - Non Cash Investing & Financing Activities

In 1993, the Company issued 14,589,775 shares of its common stock to finance
the acquisition of Sanguine Corporation (a California Corporation). 

In 1995, the Company issued 1,625,000 shares of its common stock at par value
in payment of services received from several vendors.

In 1996, the Company issued 450,000 shares of stock for services valued at
$450 and 854,864 shares for settlement of accounts payable and accrued
expenses. 

In 1997, the Company issued 100,000 shares of its common stock for services
rendered to the Company valued at $9,334.00.

In 1998, the Company issued 674,494 shares of its common stock for services
valued at $78,625.  The Company issued 240,000 shares of its common stock for
satisfaction of accounts payable valued at $49,930.