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, 2002

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

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

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of 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 the Registrant's revenues for its most recent fiscal year: December
31, 2002 - $0.

     State the aggregate market value of the voting stock of the Registrant
held by non-affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a specified
date within the past 60 days.

     May 10, 2004 - $2,641,000.  There are approximately 28,551,356
shares of common voting stock of the Registrant beneficially owned by
non-affiliates.  This valuation is based upon the average of the bid and asked
prices of our common as quoted in the "pink sheets" of the National Quotations
Bureau, LLC on that date ($0.085 to $0.10).

                (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PAST FIVE YEARS)

                                   N/A
                                   ---

                   (APPLICABLE ONLY TO CORPORATE ISSUERS)

        State the number of shares outstanding of each of the Registrant's
           classes of  common equity, as of the latest practicable date:

                         May 10, 2004 - 38,636,976
                         -------------------------

                    DOCUMENTS INCORPORATED BY REFERENCE

                            Part III, Item I
                            ----------------

Transitional Small Business Issuer Format:   Yes  X   No
------------------------------------------       --- ----
                                1
<PAGE>
                              PART I

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

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

     Developmental Information Prior to December 31, 2001.
     -----------------------------------------------------

     We were organized under the laws of the State of Utah on January 24,
1974.  For additional information about our historical development, see our
10-KSB Annual Report for the year ended December 31, 2001, that was filed with
the Securities and Exchange Commission on April 10, 2002, and is incorporated
herein by reference.  See Part III, Item 1.

     Developmental Information for the Year Ended December 31, 2002.
     ---------------------------------------------------------------

     On February 15, 2002, we entered into an Exclusive License Agreement (the
"Exclusive License Agreement") with Ascendiant-Asia, LLC, a Nevada limited
liability corporation ("Ascendiant-Asia"), whereby we granted to
Ascendiant-Asia an exclusive license to PHER-02, our developmental synthetic
red blood cell product, the licensed process and all proprietary, formula,
developmental, technological, intellectual property and patent rights, and all
other applications of the above in certain countries in Asia, including the
People's Republic of China, Thailand, Laos, Cambodia, Vietnam, Singapore,
Malaysia, Indonesia, North Korea, Burma, Mongolia and Taiwan.  No revenues or
licenses have resulted from this Exclusive License Agreement to date, and we
intend to terminate this Exclusive License Agreement directly.

     On April 1, 2002, we also entered into an Exclusive License Agreement
(the "Exclusive License Agreement") with Ascendiant-South America, LLC, a
Nevada limited liability corporation ("Ascendiant-South America"), whereby we
granted to Ascendiant-South America an exclusive license to PHER-02, our
developmental synthetic red blood cell product, the licensed process and all
proprietary, formula, developmental, technological, intellectual property and
patent rights, and all other applications of the above South America.  No
revenues or licenses have resulted from this Exclusive License Agreement to
date.  No revenues or licenses have resulted from this Exclusive License
Agreement to date, and we intend to terminate this Exclusive License Agreement
directly.

    Developmental Information for the Year Ended December 31, 2003.
     ---------------------------------------------------------------

     We provided our product, PHER-02, for cost, confidential treatment of our
formuale and the test results for use in our own planned United States Food
and Drug Administration ("FDA")application process discussed below under the
heading "Business" to three universities that are currently in the final
phases of federal and state animal toxicity trials that focus on our product's
effectiveness in perfusion for pancreas preservation for transplantation.
These perfusion studies are aimed at enhancement of islets used in transplants
as an amelioration for diabetes, which is one of the fastest growing diseases
in the United States and throughout the world.  Islet transplantation is done
to improve insulin production in Type 2 or Adult onset diabetes.

     PHER-02 is also being provided to one university that is conducting
trials for the United States Navy on submarine crew and deep sea diver
oxygenation and the treatment of bends.

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

Business.
---------

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

     We are concentrating our research and development efforts on completing
the emulsion of perfluoro-decalin and the synthetic surfactants that make up
PHER-O2.  We have completed the compounding of PHER-O2, and we are performing
initial gross animal tests, which do not require regulatory approval prior to
commencement.  However, regulatory agencies may review the data gathered from
any of these tests.  We have manufactured the experimental doses of PHER-O2
required to conduct these tests.  Our second phase of development will
involve:

     *    performing animal testing at certain universities as outlined under
the subheading "Developmental Information for the Year Ended December 31,
2003" of the heading "Business Development," above

     In our third phase of operations, we intend to continue developing the
perfluorocarbon compounds in PHER-O2 in order to optimize its quality.  We
have begun animal safety and efficacy trials in accordance with FDA
guidelines and comparable foreign regulatory requirements.

     In our final phase, we intend to:

     *    complete United States testing of PHER-O2;

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

     *    complete overseas testing in China and begin overseas sales there
and in other foreign countries.

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

     PHER-O2 has not been tested on animals or humans; nor have we submitted
any application to any federal, state or foreign agency to seek authority for
such testing.  The development process will be time consuming and expensive.
It will also be subject to extreme governmental regulation.  We will have to
prove that our product is safe and efficacious for human use.  Until then, we
will have no potential for revenues from operations except for licensing.  We
cannot assure you that we will be able to raise the money necessary to develop
PHER-O2 or that, if we raise sufficient funds, that we will ever receive the
necessary federal, state or foreign agency approval to manufacture or market
the product.

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

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

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

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

     *    free of HIV, hepatitis and other blood-borne disease;

     *    universal match for all blood types;

     *    may be mass-produced;

     *    may have a three-year shelf life;

     *    may be stored at room temperature;

     *    has controllable circulatory half-life; and

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

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

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

     *     nuclear magnetic resonance imaging;

     *     CAT scans;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     *     Biopure Corporation of Cambridge, Massachusetts, (cows blood);


     *     Hemasol, Inc. of Etobicoke, Ontario, Canada (outdated human
blood);

     *     Northfield Laboratories, Inc. of Evanston, Illinois, (outdated
human blood); and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     Since inception we have expended a total of approximately $1,279,147 on
research and development.  During years ended December 31, 2002 and 2001,
research and development expense was $79,850 and $188,007, respectively.  None
of these costs were borne by customers or others.

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

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

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

     We lease approximately 970 square feet of office space located at 101
East Green Street, Suite 11, Pasadena California, 91105, at a base rent of
$1,841 per month.  The lease runs through April 30, 2004.

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

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

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

     None; not applicable.

                                  PART II

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

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

     Our common stock commenced to trade on the "OTC Bulletin Board" of the
National Association of Securities Dealers, Inc. ("NASD") in the second
quarter of 1994 under the symbol "SGNC."  Because we had not timely filed our
reports from the first quarter of 2003 until the filing of all of all our
delinquent reports on the date of this Annual Report, we were removed from
quotations on the OTC Bulletin Board in April, 2003, and since that time, our
common stock has been quoted in the "Pink Sheets" of the National Quotations
Bureau, Inc. ("NQB") under the symbol "SGNC".  With us now being current in
the filing of all of our reports that are required to have been filed by us
with the Securities and Exchange Commission, we intend to again seek
quotations of our common stock on the OTC Bulletin Board.

     The range of high and low bid quotations for our common stock during
each quarter of the year ended December 31, 2000, each quarter of the calendar
year ended December 31, 2001, each quarter of the calendar year ended December
31, 2002, and each quarter of the calendar year ended December 31, 2003, is
shown below.  Prices are inter-dealer quotations as reported by the NASD (or
the NQB) and do not necessarily reflect transactions, retail markups, mark
downs or commissions.
                                13
<PAGE>
<TABLE>
<CAPTION>
                             STOCK QUOTATIONS*

                                                  BID

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

<S>                                     <C>                 <C>
March 31, 2000                          $1.90625            $0.23

June 30, 2000                           $1.50               $0.625

September 30, 2000                      $0.8125             $0.3125

December 31, 2000                       $0.22               $0.665

March 31, 2001                          $0.32               $0.1875

June 30, 2001                           $0.50               $0.17

September 30, 2001                      $0.32               $0.15

December 31, 2001                       $0.21               $0.11

March 31, 2002                          $0.18               $0.11

June 30, 2002                           $0.15               $0.105

September 30, 2002                      $0.11               $0.05

December 31, 2002                       $0.065              $0.03

March 31, 2003                          $0.048              $0.025

June 30, 2003                           $0.03               $0.015

September 30, 2003                      $0.13               $0.021

December 31, 2003                       $0.09               $0.045
</TABLE>

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

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

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

                         Number of
Name                   Shares or Units         Date            Consideration
----                   ---------------         ----            -------------
Nine subscribers        52,777                 04/28/99         $  9,499
under Rule 506
offering (1)

12 subscribers          46,329                 05/31/00         $ 23,900
under Rule 506
offering (1)

Four subscribers     1,635,970 (2)              09/1/00         $817,985
under Laidlaw
Offering

Five members of        530,000 (3)              11/2000-1/2002  Services
the Advisory Board

NB, Inc.               250,000 (4)              05/2001         Services

Laidlaw Global         327,194 (2)              05/2001         Warrant Ex
Securities, Inc.

Five subscribers       840,195 (5)              11/2001         Sub-Merger
from California
Corporation

Additional shares       70,030 (5)              11/2001         Sub-Merger
issued for acquisition
of subsidiary

Five members of         50,000 (3)              01/2002         Services
the Advisory Board

Five members of         50,000 (3)              04/2002         Services
the Advisory Board

Leonard W. Burningham  500,000                  05/2002-09/2002 Services
Esq. (6)

Marketview Financial   310,000                  06/2002         Services
Group, Inc. (4)

Medical Advisory Board  37,500                  08/2002         Services
(3)

Ascendiant Capital   2,000,000                  11/2002         Services
(4)

M E Dancy & Associates 500,000                  12/2002         Services
(4)

David E. Nelson        100,000                  12/2002         Services
(7)

SCS, Inc.              540,000                  12/2002         Services

Medical Advisory Board  37,500                  12/2002         Services
(3)

Leonard W. Burningham  525,000                  01/2003-03/2003 Services
Esq. (6)

Jason Carter           100,000                  01/2003         Services
(8)

National Financial   1,063,369                  2/2003          Services
Communications Corp
(4)

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

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

Medical Advisory Board  37,500                  6/2003          Services
(3)

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

Medical Advisory Board  37,500                  9/2003          Services
(3)

Leonard W. Burningham, 500,000                 10/2003          Services
Esq. (6)

Medical Advisory Board  37,500                 12/2003          Services
(3)

          (1)  Various prices from $0.10 to $0.25 per share in cash and/or
services.

          (2)  We sold 1,635,970 units in the Laidlaw Private Offering.  Each
unit consisted of two shares of our common stock and one redeemable warrant
entitling the holder to purchase one share of our common stock at a price of
$0.40 per share. This exercise price has been reduced to $0.35 per share
because the Company's registration statement was not filed within 30 days of
the closing of the offering.  Laidlaw received warrants to acquire 10% of
these units as part of its compensation.

          (3) See the caption "Executive Compensation" of the Registration
Statement.

          (4) Miscellaneous public relations services.

          (5) Issued in connection with the acquisition of the remaining 6%
interest in our 94%-owned subsidiary, Sanguine California.

          (6) Legal Services.

          (7) Services as our Secretary/Treasurer and CFO.

          (8) Stock transfer services.

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

Holders.
--------

     The number of record holders of the Company's common stock as of
May 10, 2004, was approximately 546.

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

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

Securities Authorized for Issuance under Equity Compensation Plans.
-------------------------------------------------------------------

                         Equity Compensation Plan Information
                    ------------------------------------
<TABLE>
<CAPTION>

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

               (a)                      (b)                      (c)

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

Equity
compen-
sation
plans not      -0-                      -0-                      -0-
approved
by
security
holders

Total

</TABLE>

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

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

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

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

          Stage A (approximately one year): In the first six months, we
          have completed the development of perfluoro-decalin and
          the synthetic surfactants that make up PHER-O2, manufactured
          experimental doses and have performed preliminary animal tests in
          accordance with FDA and overseas regulations.  In the second six
          months, we will  produce optimal quantities and conduct animal
          safety and efficacy trials in accordance with FDA and overseas
          requirements.  During the course of Stage A, we estimate that our
          increased technical, administrative, sales/marketing and
          manufacturing requirements will require us to the hire a few
          additional employees.  Estimated cost is $1,500,000, divided as
          follows: Completed surfactant formulation (done) and the manufacture
          of sufficient product for initial testing, $500,000; animal safety
          and efficacy trials through a sub-contractor, $600,000; and
          administrative, patent and proprietary right protection and
          marketing costs, $400,000.

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

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

     These cost estimates are based upon the prior experience of Thomas C.
Drees, Ph.D., our President and CEO.  Dr. Drees has more than 30 years'
experience in the blood industry.

     Our plan of operation for the next 12 months is having:

     *     manufactured experimental doses of  PHER-O2; and

     *     performed preliminary animal tests in accordance with FDA; and

     *     comparable foreign overseas regulations.

     In January, 2001, we engaged IriSys, Inc. ("IriSys") to provide us with
expertise in preformulation development, analytical chemistry and stability
protocol design and testing, including preparation of regulatory standards
required to achieve regulatory compliance for our principal product, PHER-O2,
to produce bottled PHER-02 for animal trials, and to conduct stability
trials.  We were successful in developing improved formulations of our
surfactants under this engagement.

     In March, 2002, we granted an Exclusive License Agreement for parts of
Asia regarding PHER-02 and related technology and patents to Ascendiant-Asia
and Ascendiant-South America.  We plan to terminate these Exclusive License
Agreements as we have received no revenues or sublicenses from them.

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

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

     Revenues for the calendar years ending December 31, 2002 and 2001 were $0
and $0, respectively.  We had no material operations, except the research and
development activities related to our subcontracted research and development
of our product.

     We realized a net loss of ($1,729,701), with a loss of ($.05) per share
during the calendar year ended December 31, 2002, and a net loss of
$(1,037,570), with a loss of $(0.04) per share for the year ending
December 31, 2001.  Most of our expense related to the value of equity
securities issued by us for services rendered.

     Our research and development expenses were $79,850 in 2002, compared to
$188,007 in 2001.  The decrease in 2002 was principally the result of our
limited capital resources.

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

     As of December 31, 2002, we had $1,393 in cash, with $2,533,395 in
current liabilities.

     During the calendar year ended December 31, 2002, we had net expenses of
$1,533,972, while receiving $0 in revenues.  We received no revenues, and
had total expenses of $918,166 during the calendar year ended December 31,
2001. Most of these expenses related to the value of equity securities issued
by us for services rendered.

     Cash resources at December 31, 2002 and 2001 were $1,393 and $23,445,
respectively.  This liquidity was provided through the sale of our common
stock in 2000 in the net amount of $635,320.

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

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

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

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

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

<PAGE>
                       SANGUINE CORPORATION
                  (A DEVELOPMENT STAGE COMPANY)

                      FINANCIAL STATEMENTS

                        DECEMBER 31, 2002
<PAGE>





                         C O N T E N T S


Independent Auditors' Reports. . . . . . . . . . . . . . .  F - 3

Balance Sheet . . . . . . . . . . . . . . . . . . . . . .   F - 5

Statements of Operations. . . . . . . . . . . . . . . . . . F - 7

Statements of Stockholders' Deficit . . . . . . . . . . . . F - 8

Statements of Cash Flows. . . . . . . . . . . . . . . . . .F - 13

Notes to the Financial Statements . . . . . . . . . . . . .F - 15
<PAGE>



                   INDEPENDENT AUDITORS' REPORT

Board of Directors
Sanguine Corporation
Pasadena, California

We have audited the accompanying  balance sheet of Sanguine Corporation (a
development stage Company) (the Company) as of December 31, 2002 and the
related statement of operations, stockholders' deficit and cash flows for the
year ended December 31, 2002  and from inception of the development stage on
January 18, 1990 through December 31, 2002.  The statements of operations,
stockholders' deficit, and cash flows of the Company from inception of the
development stage on January 18, 1990 through December 31, 2001, were audited
by other auditors whose report, dated March 12, 2002, on those financial
statements, included an explanatory paragraph that expressed substantial doubt
about the Company's ability to continue as a going concern.  Our opinion on
the statements of operations, stockholders' deficit and cash flows from
inception on January 18, 1990 through December 31, 2001, insofar as it relates
to amounts for prior periods through December 31, 2001, is based solely on the
report of other audits.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sanguine Corporation as of
December 31, 2002, and the results of its operations and its cash flows for
the year ended December 31, 2002  and for the period from inception of the
development stage (January 18, 1990) through December 31, 2002, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As discussed in Note 7 to the financial
statements, the Company has incurred significant losses, which have resulted
in an accumulated deficit and has a deficit in working capital, raising
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 7.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.


/s/HJ Associates & Consultants, LLP

HJ Associates & Consultants, LLP
Salt Lake City, Utah
March 23, 2004
<PAGE>
                                                  INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Sanguine Corporation

We have audited the accompanying statement of operations, stockholders'
deficit and cash flows of Sanguine Corporation (a development stage company)
for the year ended December 31, 2001.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of their operations and their cash flows
for the year ended December 31, 2001, in conformity with generally accepted
accounting principles of the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 7 to the
financial statements, the Company has a deficit in working capital, a
stockholders' deficit, has not generated revenues from operations, and has
incurred significant losses since inception.  These conditions raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 7.  The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


/s/TANNER + CO.
Salt Lake City, Utah
March 12, 2002
<PAGE>
<TABLE>
<CAPTION>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
                          Balance Sheet

                              ASSETS

                                                       December 31,
                                                            2002
<S>                                                   <C>
CURRENT ASSETS

     Cash                                              $    1,393
                                                       ----------
          Total Current Assets                              1,393
                                                       ----------
PROPERTY AND EQUIPMENT, NET (Note 1)                            -

          TOTAL ASSETS                                 $    1,393
                                                       ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
                               F-5
<PAGE>
<TABLE>
<CAPTION>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                         Balance Sheet


              LIABILITIES AND STOCKHOLDERS' DEFICIT


                                                     December 31,
                                                           2002
<S>                                                  <C>
CURRENT LIABILITIES

     Related party payables (Note 3)                   $    187,805
     Accounts payable                                       171,068
     Accrued salaries                                       748,000
     Accrued interest                                        10,085
     Accrued interest   related party (Note 3)              294,091
     Other accrued expenses                                   2,369
     Notes payable and convertible notes payable (Note 8)    40,000
     Notes payable   related party (Note 3, 8)            1,079,977
                                                      -------------
          Total Current Liabilities                       2,533,395

LONG-TERM LIABILITIES

     Convertible debentures (Note 8)                         28,750
                                                      -------------
          Total Long-Term Liabilities                        28,750

          Total Liabilities                               2,562,145
                                                      -------------
COMMITMENTS AND CONTINGENCIES (Note 4)

STOCKHOLDERS' DEFICIT

     Common stock: 100,000,000 shares authorized of
      $0.001 par value, 34,798,607 shares issued and
      outstanding                                            34,799
     Additional paid-in capital                           3,422,257
     Expenses prepaid with common stock (Note 9)            (96,510)
     Deficit accumulated during the development stage    (5,921,298)
                                                      -------------
          Total Stockholders' Deficit                    (2,560,752)
                                                      -------------
          TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $       1,393
                                                      =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
                               F-6
<PAGE>
<TABLE>
<CAPTION>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                    Statements of Operations

                                                            From Inception of
                                                             the Development
                                                                Stage on
                                                               January 18,
                                       For the Years Ended    1990 Through
                                        December 31,            December
                                      2002          2001        31,  2002
<S>                                  <C>          <C>        <C>
REVENUE                                 $       -   $       -     $   150,000

OPERATING EXPENSES

     Consulting                         1,174,457     369,125       2,210,102
     Research and development              79,850     188,007       1,279,147
     Selling, general and administrative  279,665     361,034       2,150,239
                                       ----------   ---------     -----------
          Total Operating Expenses      1,533,972     918,166       5,639,488
                                       ----------  ----------     -----------
LOSS FROM OPERATIONS                   (1,533,972)   (918,166)     (5,489,488)
                                       ----------  ----------     -----------
OTHER INCOME (EXPENSE)

     Interest income                            4      12,831          27,457
     Interest expense                    (161,976)   (132,235)       (425,510)
     Loss on cash deposit                 (10,020)          -         (10,020)
     Loss on settlement of debt           (23,737)          -         (23,737)
                                      -----------  ----------     -----------
          Total Other Income (Expense)   (195,729)   (119,404)       (431,810)
                                      -----------  ----------     -----------
NET LOSS                              $(1,729,701)$(1,037,570)     (5,921,298)
                                      ===========  ==========     ===========
BASIC LOSS PER SHARE                  $     (0.05)$     (0.04)
                                      =========== ===========
WEIGHTED AVERAGE NUMBER OF
  SHARES OUTSTANDING BASIC AND
  DILUTED                              31,617,247  28,783,000
                                       ==========  ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
                               F-7
<PAGE>
<TABLE>
<CAPTION>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
               Statements of Stockholders' Deficit
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
<S>                     <C>        <C>      <C>         <C>       <C>
Balance, January 18, 1990
Retroactive restated     1,428,364 $ 1,428 $2,423,214   $     -   ($2,464,642)

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

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

Contributed capital by
officer                          -       -        750         -             -

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

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

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

Net loss for the year
ended December 31,
1993                             -       -          -         -       (92,895)
                        ----------  ------  ---------   -------  ------------
Balance, December 31,
1993                    16,530,859 $16,530 $2,533,454   $     -  $ (2,575,221)
                        ----------  ------  ---------   -------  ------------
The accompanying notes are an integral part of these financial statements.
                               F-8
<PAGE>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
          Statements of Stockholders' Deficit (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance, December 31,
1993                    16,530,859 $16,530 $2,533,454         -  $ (2,575,221)

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

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

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

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

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

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

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

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

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

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

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

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

The accompanying notes are an integral part of these financial statements.
                               F-9
<PAGE>
                     SANGUINE CORPORATION
                  (A Development Stage Company)
           Statements of Stockholders' Deficit (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance, December 31,
1997                    20,977,723 $20,977  $ 606,176     $     - $(1,125,108)

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

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

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

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

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

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

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

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

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

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

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

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

The accompanying notes are an integral part of these financial statements.
                               F-10
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
         Statements of Stockholders' Deficit (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance Forward         28,311,188 $28,312 $1,985,116     $     - $(3,154,027)

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

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

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

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

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

Amortization of prepaid
expenses                         -       -          -      43,125           -

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

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

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

Warrants issued for
services                         -       -    989,956           -           -

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

The accompanying notes are an integral part of these financial statements.
                               F-11
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
         Statements of Stockholders' Deficit (Continued)
                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance Forward         33,988,607 $33,989 $3,294,642   $(110,885)$(4,191,597)

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

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

Amortization of prepaid
expenses                         -       -          -      14,375           -

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

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

                                                            From Inception of
                                                             the Development
                                                                 Stage on
                                                                January 18,
                                        For the Years Ended    1990 Through
                                            December 31,         December
                                        2002          2001       31,  2002
<S>                                     <C>             <C>      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

   Net loss                              $(1,729,701) $(1,037,570)$(5,921,298)
   Adjustments to reconcile net loss to
   net cash used by operating activities:
     Depreciation and amortization                 -            -       4,609
     Common stock issued for services      1,123,569      161,001   2,151,371
     Interest on beneficial conversion
      feature                                 25,000            -      25,000
     Legal expense related to beneficial
      conversion feature                       3,750            -       3,750
     Note payable issued for services         28,750            -     727,950
     Recognition of expenses prepaid
      with common stock                       14,375       57,500      71,875
     (Gain) Loss on extinguishments of
     debt                                     23,737            -      23,737
     Changes in assets and liabilities:
        Decrease in prepaid expenses          55,000      150,625     205,625
        Increase in accounts payable
         and related party payables          142,588       55,703     335,136
        Increase in accrued interest payable 132,080      112,400     304,176
        Increase in accrued liabilities            -            -       2,369
        Increase in accrued salaries         104,000       60,000     748,000
                                          ---------- ------------  ----------
      Net Cash Used by Operating Activities  (76,852)    (440,341) (1,317,700)
                                          ---------- ------------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES

     Cash paid for fixed assets                    -            -      (4,609)
                                          ---------- ------------ -----------
      Net Cash Used by Investing Activities        -            -      (4,609)
                                          ---------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES

     Proceeds from issuance of convertible
      debentures                                   -            -      40,000
     Proceeds from notes payable and notes
       payable   related party                30,000      (68,166)    169,377
     Payments on notes payable and notes
       payable   related party                     -            -      (8,600)
     Contributed capital                           -            -         750
     Common stock issued for cash             24,800            -   1,122,175
                                          ---------- ------------ -----------
      Net Cash Provided (Used) by
       Financing Activities                   54,800      (68,166)  1,323,702
                                          ---------- ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                           (22,052)    (508,507)      1,393

CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR                                       23,445      531,952           -
                                          ---------- ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR  $    1,393 $     23,445 $     1,393
                                          ========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
                               F-13
<PAGE>
<TABLE>
<CAPTION>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
               Statements of Cash Flows (Continued)

                                                             From Inception of
                                                              the Development
                                                                  Stage on
                                                                 January 18,
                                       For the Years Ended      1990 Through
                                           December 31,            December
                                        2002          2001         31,  2002
<S>                                     <C>             <C>      <C>
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES

CASH PAID FOR:

     Interest                           $        -     $  19,834   $  114,883
     Income taxes                       $        -     $       -   $        -

NON-CASH FINANCING ACTIVITIES

     Common stock issued for services
     rendered                            $1,123,569     $ 161,001  $2,151,371
     Interest on beneficial conversion
     feature                             $   25,000     $       -  $   25,000
     Legal expense related to beneficial
      conversion feature                 $    3,750     $       -  $    3,750
     Notes payable issued for services   $   28,750     $       -  $  727,950
     Common stock issued for prepaid
      services                           $   96,510     $  57,500  $  154,010

</TABLE>
The accompanying notes are an integral part of these financial statements.
                               F-14
<PAGE>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
                 Notes to the Financial Statements
                    December 31, 2002 and 2001

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a.  Organization

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

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

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

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

     b.  Accounting Method

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

     c.  Basic Loss Per Share

     The computation of basic loss per share of common stock is based on the
     weighted average number of shares outstanding during the period.
                                         For the Years Ended
                                                December 31,
                                        2002                  2001

     Loss (numerator)              $    (1,729,701)    $    (1,037,570)
     Shares (denominator)               31,617,247          28,783,000
     Per share amount              $         (0.05)    $         (0.04)

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

                               F-15
<PAGE>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
                  Notes to the Financial Statements
                    December 31, 2002 and 2001

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

     d.  Estimates

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

     e.  Income Taxes

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

     Net deferred tax assets consist of the following components as of
     December 31, 2002 and 2001:

                                          2002                2001

     Deferred tax assets:
          NOL Carryover            $    1,374,800      $    1,153,000
          Accrued Officer Salary          291,700             240,000
          Related Party Interest           49,755                   -
                                   --------------      --------------
                                        1,716,255           1,393,000
          Deferred tax liabilities:             -                   -

          Valuation allowance      $   (1,716,255)     $   (1,393,000)
                                   --------------      --------------
          Net deferred tax asset   $            -      $            -
                                   ==============      ==============

     The income tax provision differs from the amount of income tax
     determined by applying the U.S. federal and state income tax rates of
     39% to pretax income from continuing operations for the years ended
     December 31, 2002 and 2001 due to the following:
                               F-17
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                 Notes to the Financial Statements
                    December 31, 2002 and 2001

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

     e.  Income Taxes (Continued)

                                           2002                2001
          Book Income                   $    (674,545) $    (387,000)
          Meals & Entertainment                 3,360              -
          Accrued Interest                    (15,185)             -
          Accrued Salaries                     40,560              -
          Stock for Services/Options Expense  476,460              -
          Other                                   (40)             -
          Valuation Allowance                 169,390        387,000
                                         ------------  -------------
                                         $          -  $           -
                                         ============  =============

     At December 31, 2002, the Company had net operating loss carryforwards
     of approximately $3,525,000 that may be offset against future taxable
     income from the year 2003 through 2022.  No tax benefit has been
     reported in the December 31, 2002  financial statements
     since the potential tax benefit is offset by a valuation allowance of
     the same amount.

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

     f.  Development Stage

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

     g.  Property and Equipment

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

     h. Revenue Recognition

     Revenue is recognized when the sales amount is determined, shipment of
     goods to the customer has occurred and collection is reasonably assured.
                               F-17
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                  Notes to the Financial Statements
                    December 31, 2002 and 2001

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

     i.  Newly Adopted Accounting Pronouncements

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

     SFAS No. 145 -- On April 30, 2002, the FASB issued FASB Statement No.
     145 (SFAS 145), "Rescission of FASB Statements No. 4, 44, and 64,
     Amendment of FASB Statement No. 13, and Technical Corrections."  SFAS
     145 rescinds both FASB Statement No. 4 (SFAS 4), "Reporting Gains and
     Losses from Extinguishments of Debt," and the amendment to SFAS 4, FASB
     Statement No. 64 (SFAS 64), "Extinguishments of Debt Made to Satisfy
     Sinking-Fund Requirements."  Through this rescission, SFAS 145
     eliminates the requirement (in both SFAS 4 and SFAS 64) that gains and
     losses from the extinguishments of debt be aggregated and, if material,
     classified as an extraordinary item, net of the related income tax
     effect.  However, an entity is not prohibited from classifying such
     gains and losses as extraordinary items, so long as it meets the
     criteria in paragraph 20 of Accounting Principles Board Opinion No. 30,
     Reporting the Results of Operations Reporting the Effects of Disposal of
     a Segment of a Business, and Extraordinary, Unusual and Infrequently
     Occurring Events and Transactions.  Further, SFAS 145 amends paragraph
     14(a) of FASB Statement No. 13, "Accounting for Leases", to eliminate an
     inconsistency between the accounting for sale-leaseback transactions and
     certain lease modifications that have economic effects that are similar
     to sale-leaseback transactions.  The amendment requires that a lease
     modification (1) results in recognition of the gain or loss in the 9
     financial statements,  (2) is subject to FASB Statement No. 66,
     "Accounting for Sales of Real Estate," if the leased asset is real
     estate (including integral equipment), and (3) is subject (in its
     entirety) to the sale-leaseback rules of FASB Statement No. 98,
     "Accounting for Leases: Sale-Leaseback Transactions Involving Real
     Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term,
     and Initial Direct Costs of Direct Financing Leases."  Generally, FAS
     145 is effective for transactions occurring after May 15, 2002.  The
     Company does not expect that the adoption of SFAS 145 will have a
     material effect on its financial performance or results of operations.

     SFAS No. 146 -- In June 2002, the FASB issued SFAS No. 146, "Accounting
     for Exit or Disposal Activities" (SFAS 146).  SFAS 146 addresses
     significant issues regarding the recognition, measurement, and reporting
     of costs that are associated with exit and disposal activities,
     including restructuring activities that are currently accounted for
     under EITF No. 94-3, "Liability Recognition for Certain Employee
     Termination Benefits and Other Costs to Exit an Activity (including
     Certain Costs Incurred in a Restructuring)." The scope of SFAS 146 also
     includes costs related to terminating a contract that is not a capital
     lease and termination benefits that employees who are involuntarily
     terminated receive under the terms of a one-time benefit arrangement
     that is not an ongoing benefit arrangement or an individual deferred-
     compensation contract. SFAS 146 will be effective for exit or disposal
     activities that are initiated after December 31, 2002 and early
     application is
                               F-17
<PAGE>
                     SANGUINE CORPORATION
                  (A Development Stage Company)
                 Notes to the Financial Statements
                    December 31, 2002 and 2001

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

     i.  Newly Adopted Accounting Pronouncements (Continued)

     encouraged.  The provisions of EITF No. 94-3 shall continue to apply for
     an exit activity initiated under an exit plan that met the criteria of
     EITF No. 94-3 prior to the adoption of SFAS 146.

     The effect on adoption of SFAS 146 will change on a prospective basis
     the timing of when the restructuring charges are recorded from a
     commitment date approach to when the liability is incurred. The Company
     does not expect that the adoption of SFAS 146 will have a material
     effect on its financial performance or results of operations.

     SFAS No. 148 -- In December 2002, the FASB issued SFAS No. 148,
     "Accounting for Stock-Based Compensation -- Transition and
     Disclosure"(SFAS 148"). SFAS 148 amends SFAS No. 123 "Accounting for
     Stock-Based Compensation" ("SFAS 123"), to provide alternative methods
     of transition for a voluntary change to the fair value based method of
     accounting for stock-based employee compensation. In addition, SFAS 148
     amends the disclosure requirements of SFAS 123 to require prominent
     disclosures in both annual and interim financial statements about the
     method of accounting for stock-based employee compensation and the
     effect of the method used on reported results. SFAS 148 is effective for
     fiscal years beginning after December 15, 2002. The interim disclosure
     provisions are effective for financial reports containing financial
     statements for interim periods beginning after December 15, 2002. The
     Company is currently evaluating the effect that the adoption of SFAS 148
     will have on its results of operations and financial condition.

     SFAS No. 149   In April 2003, the FASB issued Statement of Financial
     Accounting Standards No. 149  ("SFAS 149"), Amendment of Statement 133
     on Derivative Instruments and Hedging Activities, to provide
     clarification on the meaning of an underlying, the characteristics of a
     derivative that contains financing components and the meaning of an
     initial net investment that is smaller than would be required for other
     types of contracts that would be expected to have a similar response to
     changes in market factors.  This statement will be applied prospectively
     and is effective for contracts entered into or modified after June 30,
     2003.  The statement will be applicable to existing contracts and new
     contracts relate to forward purchases or sales of when-issued securities
     or other securities that do not yet exist.  The Company does not expect
     that the adoption of SFAS 149 will have a material effect on the
     Company's financial statements.

     SFAS No. 150   In May 2003, the FASB issued Statement of Financial
     Accounting Standards No. 150 ("SFAS 150), "Accounting for Certain
     Financial Instruments with Characteristics of Both Liabilities and
     Equity." This statement establishes standards for how a company
     classifies and measures certain financial instruments with
     characteristics of both liabilities and equity. This statement is
     effective for financial instruments entered into or modified after May
     31, 2003 and otherwise is effective at
                               F-19
<PAGE>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
                  Notes to the Financial Statements
                    December 31, 2002 and 2001

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

     i.  Newly Adopted Accounting Pronouncements (Continued)

     the beginning of the first interim period beginning after June 15, 2003.
     The statement will be implemented by reporting the cumulative effect of
     a change in accounting principle for financial instruments created
     before the issuance date of the statement and still existing at the
     beginning of the period of adoption.

     The Company does not expect that the adoption of SFAS 150 will have a
     material effect on the Company's  financial statements.

     j.  Equity Securities

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

     k.  Stock Options

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

     l.   Valuation of Options and Warrants

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

     m.  Cash and Cash Equivalents

     The Company considers all highly liquid investments with a maturity of
     three months or less when purchased to be cash equivalents.
                               F-20
<PAGE>
                     SANGUINE CORPORATION
                  (A Development Stage Company)
                 Notes to the Financial Statements
                    December 31, 2002 and 2001

NOTE 2 -  MINORITY INTEREST

     Sanguine Corporation (California) had a total of 6,586,800 shares of its
     common stock issued and outstanding at June 14, 1993.  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 California Corporation
     represented approximately six percent (6%) of the Company's outstanding
     stock.  No provisions for minority interest has been made on the
     financial statements because of the losses incurred in prior periods and
     the stockholders' deficit of California.

     In November 2001 Sanguine Corporation (Nevada) acquired the remaining
     386,800 shares of Sanguine Corporation (California) through the issuance
     of 840,195 shares of common stock.  As of that date, Sanguine
     Corporation (California) was dissolved and is operating as a foreign
     corporation in California.

NOTE 3 -  RELATED PARTY TRANSACTIONS

     At December 31, 2002, related party notes payable consist of the
     following:

     An unsecured note payable to the officer of the Company due on demand,
     payable through the issuance of 1,600,000 shares of common stock as
     repayment for personally held shares of the officer that were issued as
     payment of a Company obligation.  The face value of the note of $699,200
     is based on the market price per share on the date of transfer by the
     officer.  Interest is computed at 12% per annum.

     An unsecured note payable to an officer of the Company, due on demand,
     payable through issuance of 1,000,000 shares of common stock as
     repayment for personally-held shares of the officer that were issued as
     payment of a Company obligation.  The face value of the note of $220,000
     is based on the market price per share on the date of transfer by the
     officer.  Interest is computed at 12% per annum.

     Unsecured notes payable to an officer of the Company in the amount of
     $198,943, due on demand, with interest at 12% per annum.  The unpaid
     principal balance was $160,777 at December 31, 2002.

     Accrued interest on related party notes totaled $294,091 at December 31,
     2002, while interest expense on the related party notes totaled $127,580
     and $127,735 for the years ended December 31, 2002 and 2001,
     respectively.

     Accounts payable at December 21, 2002 includes amounts owed to officers
     of the Company for reimbursement of expenses paid of $187,805.

NOTE 4 -  COMMITMENTS AND CONTINGENCIES

     During February 1994, the Company entered into a lease for office space
     in Pasadena, California.  The lease has been extended three times
     through April 2004 with monthly rent payments of $1,744 for the first
     twelve months with annual increases.
                               F-21
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                Notes to the Financial Statements
                    December 31, 2002 and 2001

NOTE 4 -  COMMITMENTS AND CONTINGENCIES (Continued)

     Future minimum lease payments under this non-cancelable operating lease
     are as follows:
                                             2003 $    21,900
                                             2004       7,364
                                                  -----------
                                                  $    29,264
                                                  ===========

     Rent expense was $21,318 and $21,000 for the years ended December 31,
     2002 and 2001, respectively.

     Employment Agreements

     On September 23, 1993, the Board of Directors entered into Employment
     Agreements with its CEO and Vice President for a seven-year period
     beginning on August 1, 1993.  The Employment Agreements were
     subsequently extended through January 22, 2007.

     The Employment Agreements call for a base salary of $120,000 to the CEO
     and $72,000 to the Vice President annually.  Additionally, the Company
     provides insurance benefits, home office reimbursement, an automobile
     and reimbursement for out of pocket expenses.  On June 2, 1994, the CEO
     and Vice President agreed to cancel all outstanding accruals for
     expenses under the Employment Agreements and to accept as full
     satisfaction of all of claims, payments receive in November 1993.  In
     addition, the Employment 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 Employment Agreements.  Beginning September 1,
     1994, the CEO and Vice President were entitled to receive one-half the
     salary specified until the Company raised $1,500,000 in debt or equity
     funding.  All funds raised since the completion of our reorganization
     with Sanguine California are being counted in arriving at this sum, but
     amounts do not exceed $1,500,000.

     As of December 31, 2002, a total of $748,000 in salaries has been
     accrued.

     License Agreement

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

     The agreement calls for certain minimum levels of annual production and
     a royalty payment of $5.00 per every 200 milliliter unit produced.  If
     minimum levels are not reached, the Company may terminate the agreement.
     As of December 31, 2002, no royalties have been paid and the agreement
     has not been cancelled.
                               F-22
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                 Notes to the Financial Statements
                    December 31, 2002 and 2001

NOTE 5 -  COMMON STOCK TRANSACTIONS

     During the year ended December 31, 2002, the Company issued 1,615,000
     shares of common stock for services valued at $58,737; 1,700,000 shares
     issued for prepaid services; 500,000 shares issued for cash-less
     warrants exercised valued at $103,625; and 310,000 shares issued for
     cash exercise of warrants for $24,800.

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

NOTE 6 -  STOCK OPTIONS AND WARRANTS

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

     During February 2002, the Company issued three warrants to purchase an
     aggregate of 3,000,000 shares of the Company's common stock to
     individuals related to an entity that received the exclusive license
     rights of the Company's PHER-02 product in Asia (See Note 4).  The
     warrants are exercisable at a price of $0.15 per share and expire
     February 21, 2005.  The warrants also have a call provision, which the
     Company can exercise and require the holders of the warrants to exercise
     their warrants if at any time the Company's common stock trades for an
     amount equal to or greater than $1.00 per share for 10 consecutive
     trading days.  The Company recognized $237,455 in expense associated
     with the issuance of these warrants.

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

     During March 2002, the Company issued a warrant to an individual to
     acquire up to 500,000 shares of the Company' s common stock for
     services.  The exercise price of the warrant is the lower of 50% of the
     average bid price of the Company's common stock for the five trading
     days prior to the exercise of the warrant or $0.08 per share.  The
     warrant expires March 11, 2005.  The Company recognized $58,784 in
     expense associated with the issuance of these warrants.
                               F-23
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                 Notes to the Financial Statements
                    December 31, 2002 and 2001

NOTE 6 -  STOCK OPTIONS AND WARRANTS (Continued)

     A summary of the status of the Company's outstanding stock options as of
     December 31, 2002 and 2001 and changes during the years then ended is
     presented below:

                                         2002                    2001
                                               Weighted               Weighted
                                                Average                Average
                                               Exercise               Exercise
                                  Shares         Price     Shares       Price
       Outstanding, beginning of
        year                       2,270,209   $   0.30  2,270,209   $    0.30
       Granted                     9,537,500       0.10          -           -
       Expired/Cancelled                   -          -          -           -
       Exercised                    (810,000)      0.07          -           -
                                  ----------   --------  ---------   ---------
       Outstanding end of year    10,997,709   $   0.15  2,270,209   $    0.30
                                  ==========   ========  =========   =========
       Exercisable                10,997,709   $   0.15  2,270,209   $    0.30
                                  ==========   ========  =========   =========

                             Outstanding              Exercisable
                                  Weighted
                         Number   Average      Weighted    Number    Weighted
                      Outstanding Remaining    Average  Exercisable  Average
          Range of    at December Contractual  Exercise at December  Exercise
     Exercise Prices   31, 2002      Life       Price     31, 2002     Price
    $     0.13           470,642     3.73      $  0.13      470,642  $   0.13
          0.35         1,799,567     1.66         0.35    1,799,567      0.35
     0.08-0.15         8,727,500     3.21         0.10    8,727,500      0.10
                      ----------    -----      -------   ----------  --------
    $0.07-0.35        10,997,709     2.98      $  0.15   10,997,709  $   0.15
                      ==========    =====      =======   ==========  ========

       The Company estimates the fair value of each stock option at the
       grant date by using the Black-Scholes option pricing model based on
       the following assumptions:


                                                       For the Year
                                                           Ended
                                                    December 31, 2002

       Risk free interest rate                         3.51% - 4.30%
       Expected life                                     3   5 years
       Expected volatility                         106.85% - 107.26%
       Dividend yield                                          0.00%
                            F-24
<PAGE>

                     SANGUINE CORPORATION
                  (A Development Stage Company)
                Notes to the Financial Statements
                    December 31, 2002 and 2001

NOTE 7 -  GOING CONCERN

       The Company's  financial statements are prepared using
       generally accepted accounting principles in the United States of
       America applicable to a going concern, which contemplates the
       realization of assets and liquidation of liabilities in the normal
       course of business.  The Company has historically incurred
       significant losses, which have resulted in an accumulated deficit of
       $5,921,298 and $4,191,597 at December 31, 2002 and 2001, respectively,
       which raises substantial doubt about the Company's ability to continue
       as a going concern.  The accompanying financial statements do not
       include any adjustments relating to the recoverability and
       classification of asset carrying amounts or the amount and
       classification of liabilities that might result from the outcome of
       this uncertainty.  The Company's management has taken certain steps to
       maintain its operating and financial requirements in an effort to
       enable the Company to continue as a going concern until such time that
       revenues are sufficient to cover expenses, including:

       The Company's management has taken certain steps to maintain its
       operating and financial requirements in an effort to continue as a
       going concern until such time as revenues are sufficient to cover
       expenses.  Future plans include a debt or equity offering for between
       $300,000 - $500,000 that should enable the Company to complete the
       animal testing stage for FDA approval of its product.  However,
       management cannot provide any assurance that the Company will be
       successful in accomplishing any of its plans.

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


NOTE 8    NOTES PAYABLE AND CONVERTIBLE DEBENTURES

       During February 2002, the Company entered into a convertible note
       agreement providing for the receipt of $25,000 in services in
       exchange for a 5% convertible note and warrants to purchase 5,937,500
       shares of common stock at an exercise price of the greater of $0.08
       or 66 2/3% of the five-day trading average of the Company's common
       stock.  The note is convertible into common stock of the Company at
       the lesser of $0.08 or 66 2/3% of the five-day trading average of the
       Company's common stock.  The beneficial conversion feature of the
       note resulted in $25,000 in additional interest expense.

       During February 2002, the Company entered into a convertible note
       agreement providing for the receipt of $3,750 of legal services in
       exchange for a 5% convertible note.  The note is convertible into
       common stock of the Company at the lesser of $0.08 or 66 2/3% of the
       five-day trading average of the Company's common stock.
                               F-25
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
                 Notes to the Financial Statements
                    December 31, 2002 and 2001

NOTE 8    NOTES PAYABLE AND CONVERTIBLE DEBENTURES (Continued)

       Notes payable, convertible debentures and notes payable   related
       parties consist of the following as of December 31, 2002:

       Unsecured note payable to an officer of the Company
        due on demand, payable through the issuance of 1,600,000
        shares of common stock as repayment for personally   held
        shares of the Company obligation; the face value of the note
        is based on the market price per share on the date of transfer
        by the officer; interest is computed at 12% per year.
        (see Note 3)                                                  $699,200

       Unsecured note payable to an officer of the Company
        due on demand, payable through the issuance of 100,000
        shares of common stock as repayment for personally   held
        shares of the Company obligation; the face value of the note
        is based on the market price per share on the date of transfer
        by the officer; interest is computed at 12% per year.
        (see Note 3)                                                   220,000

       Unsecured notes payable to an officer of the Company, due
        on demand, interest at 12% per annum                           160,777

       Unsecured note payable to an individual, due on demand,
        interest at 10% per annum, convertible into common stock
        at $0.43 per share.                                             15,000

       Unsecured note payable to a partnership, due on demand,
        interest at 12% per annum                                       25,000

       Unsecured convertible debenture, due February 28, 2004,
        interest at 5% per annum                                        25,000

       Unsecured convertible debenture, due February 28, 2004,
        interest at 5% per annum                                         3,750
                                                                    ----------
               Total Note and Debentures Payable                    $1,148,727
                                                                    ==========
Annual maturities notes and debentures payable are as follows:

                            Years Ending
                            December 31,

                            2003                      $1,119,977
                            2004                          28,750
                                                      ----------
                                                      $1,148,727
                                                      ==========

       Interest expense on the above debt amounted to $133,226 and $132,235
       for the years ended December 31, 2002 and 2001, respectively.
                               F-26
<PAGE>
                       SANGUINE CORPORATION
                  (A Development Stage Company)
                  Notes to the Financial Statements
                    December 31, 2002 and 2001


NOTE 9 -  PREPAID EXPENSES AND EXPENSES PREPAID WITH COMMON STOCK

       In April 2001, the Company entered into two consulting agreements in
       which the consultants would provide financial, general business, and
       strategic planning services.  As compensation for one consulting
       agreement, the Company issued 250,000 shares of its common stock at
       $0.23 per share.  The Company recorded $57,500 of expenses prepaid
       with common stock and has recognized the expense ratably over the one
       year term of the consulting agreement.

       For the second consulting agreement, the Company's President
       transferred 1,000,000 of his personal shares of common stock in the
       Company as prepayment of the consulting fees.  The Company recorded
       $220,000 of prepaid expense and a note payable to the Company's
       President based on the current market price of the Company's common
       stock of $0.22 per share.  The Company has recognized the expense
       ratably over the one-year term of the consulting agreement.

       During  November 2002, the Company issued 2,000,000 shares of common
       stock for services and prepaid services valued at $114,000.  The
       unamortized portion at December 31, 2002 totaled $96,510.

       During the year ended at December 31, 2002, the Company recognized
       $69,375 of consulting expense related to these agreements.

NOTE 10-  SUBSEQUENT EVENTS

       During fiscal year 2003, the Company issued 150,000 shares of common
       stock for services valued at $9,188; 1,000,000 shares issued for
       payables of $17,057 and prepaid services valued at $62,943; 625,000
       shares issued for cash-less option exercises valued at $24,000; and
       1,063,369 shares issued for payables of $34,028 and gain on
       settlement of $25,972.

       During February through August 2003, the Company's President lent the
       Company $18,000 and was repaid $800.  The new amounts are due upon
       demand and accrue interest at 12% per annum.

       During January 2003, the Company borrowed $6,000 from an unrelated
       party for a non-interest bearing advance, due on demand.

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

     The Company changed accountants, from Tanner + Company, Inc. on December
11, 2003.  The new accounting firm is HJ Associates & Consultants, LLP.  For
additional information on the change of accountants, see our 8-K Current
Report dated December 11, 2003, as amended, which is incorporated herein by
reference.

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

     As of the end of the period covered by this Annual Report, we carried out
an evaluation, under the supervision and with the participation of our
President and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures.  Based on this
evaluation, our President and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic Securities and
Exchange Commission reports.  It should be noted that the design of any system
of controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless
of how remote.  In addition, we reviewed our internal controls, and there have
been no significant changes in our internal controls or in other factors that
could significantly affect those controls subsequent to the date of their last
evaluation.

                                 PART III

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

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

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

<TABLE>
<CAPTION>

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

                                               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 Chairman          9/00         6/2003 (Death)
                            Vice President         6/93         6/2003 (Death)
                            Secretary/             6/93         6/2003 (Death)
                            Treasurer              6/93         6/2003 (Death)
                            Director               6/93         6/2003 (Death)
                            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              *

          *    These persons presently serve in the capacities
               indicated.
</TABLE>
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.
<TABLE>

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

                                               Date of          Date of
                            Positions         Election or      Termination
  Name                      Held              Designation      or Resignation
  ----                      ----              -----------      --------------
<S>                          <C>                  <C>               <C>
Rear Admiral (Retired)      Chairman             10/00              6/01
Merton Dick Van Orden

Craig Morrison, M.D.        Member               10/00               *

William Regelson, M.D.      Member               10/00           1/03 (Death)

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

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

Joseph P. O'Malley, M.D.    Member               6/01                *
</TABLE>

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

     Thomas C. Drees, Ph.D., MBA, Chairman, President, CEO and a Director. Dr.
Drees, age 75, 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 29 years, Dr. Drees has been involved at top management
levels with the collection, manufacture and marketing of human blood plasma
derivatives.  He has written many publications on the subject, including the
widely-acclaimed book "Blood Plasma: The Promise and the Politics," Ashley
Books, New York, 1983.

     David E. Nelson, CPA, Chief Financial Officer and Director.  Mr. Nelson,
age 60, received a B.S. degree in accounting from the University of Utah in
1966.  He has over 20 years' experience in operations, finance and regulatory
compliance of stock brokerage firms.  He is the past President of Covey &
Company, Inc., a broker/dealer formerly registered with the Securities and
Exchange Commission.  Mr. Nelson has been a member of the NASD's Board of
Arbitrators, the American Institute of Certified Public Accountants and the
Utah Association of Certified Public Accountants.

     Edward L. Kunkel, Esq., Director.  Mr. Kunkel is 56 years of age.
He graduated with a Juris Doctor degree from the University of Southern
California in 1973.  From 1973 to 1978, he practiced law with the firm of
Karns & Karabian in Los Angeles, California.  From 1978 to the present, he has
practiced educational law, real estate law and general business law in his own
firm.  Mr. Kunkel is a member of the State Bar of California, the Los Angeles
County Bar Association and the National School Board Attorneys' Association.
He has also been a licensed real estate broker since 1979.

     Craig Morrison, M.D., Advisory Board Member, is 61 years of age, and
practices at the Brigham Young Student Health Center.  He has been an
attending and consulting staff general surgeon since 1978 at the following
hospitals: Utah Valley Regional Medical Center, Orem Community Hospital,
Colombia Mountain View Hospital and Central Valley Hospital.  Dr. Morrison
received his Doctor of Medicine Degree from the University of Oregon Medical
School in 1970, followed by a pediatric internship and surgical residency at
the University of Southern California-Los Angeles County Hospital and the
Huntington Memorial Hospital in 1975.

     Leon Cass Terry, M.D., Ph.D., Advisory Board Member, is 62 years of age,
and joined the Medical College of Wisconsin as a Professor of Neurology and
Professor of Physiology in 1989, and has recently retired.  Focusing on his
professorial duties, Dr. Terry recently stepped down from his position as the
Chairman of Neurology, which he held from June of 1989 to May, 2000.  During
his tenure, Dr. Terry was the Associate Dean for Ambulatory Care from January,
1997 to March, 1998, and was the Chief of Staff from January, 1997 to January,
1999.  He also held previous teaching and professional positions as a Research
Scientist for the University of Michigan, Institute of Gerontology; Professor
of Neurology and Associate Professor of Physiology and Neurology at the
University of Michigan; and Associate Professor of Neurology at the University
of Tennessee Center for Health Sciences.  Dr. Terry earned his Doctorate of
Pharmacology from the University of Michigan, his Doctor of Medicine from
Marquette University Medical School, his Ph.D. in Experimental Medicine from
McGill University Medical School and his Master of Business Administration
from the University of South Florida.  Dr. Terry has authored over 100 peer-
reviewed articles, abstracts and book chapters in well known and respected
publications.  He was also principal or co-investigator on over 30 grants from
the National Institute of Health, various pharmaceutical companies,
philanthropic donations and others.  He has also conducted clinical trials in
various neurologic disorders.

     Herbert J. Meiselman, Sc.D., Advisory Board Member, is 63 years of age.
He is an active Professor and Vice Chairman of the University of Southern
California School of Medicine, Department of Physiology and Biophysics.
Professor Meiselman graduated from Michigan Technical University with a BS
degree in 1962.  He received a Sc.D. degree from the Massachusetts Institute
of Technology in 1965.  As a Research Fellow at the California Institute of
Technology, he studied in-vivo microcirculatory blood flow from 1966 to 1968.
In 1968, he expanded his research studies to include in-vivo blood rheology, a
program jointly administered by the California Institute of Technology and the
University of Southern California Medical School.  Since 1972, Dr. Meiselman's
research at the University of Southern California has been concentrated in the
areas of blood rheology and the physical behavior of red blood cells and white
blood cells.  He has authored or co-authored over 300 papers on numerous
blood-related topics.

     Joseph P. O'Malley, M.D., Advisory Board Member, is 72 years of age.  Mr.
O'Malley graduated from Harvard Medical School, cum laude, served 25 years
with the National Institute of Health and the Federal Drug Administration and
15 years with the American Red Cross as Regulatory Head of blood services.

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

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

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

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

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

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

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

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

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

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

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

     We have adopted a Code of Ethics which we have attached as Exhibit 14 to
this Annual Report.

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

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

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

<TABLE>
<CAPTION>
                    SUMMARY COMPENSATION TABLE


                           Long Term Compensation

                    Annual Compensation   Awards  Payouts

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

                                              Secur-
                                              ities        All
Name and   Year or               Other  Rest- Under- LTIP  Other
Principal  Period   Salary Bonus Annual rictedlying  Pay- Comp-
Position   Ended      ($)   ($)  Compen-Stock Optionsouts ensat'n
-----------------------------------------------------------------
<S>         <C>       <C>   <C>   <C>   <C>    <C>   <C>  <C>
Thomas C.
Drees, Ph.D,12/31/02    *     0     0     0      0     0   0
MBA, CEO,   12/31/01    *     0     0     0      0     0   0
President   12/31/00    *     0     0     0      0     0   0
and Chairman
of the Board

Anthony G.
Hargreaves, 12/31/02   36000  0     0      0     0     0   0
Vice Pres., 12/31/01   72000  0     0      0     0     0   0
Sec./Tres.  12/31/00   24000  0     0   300,000  0     0   0
and Director

David E.
Nelson, CPA 12/31/02    0     0     0      0     0     0   0
CFO and     12/31/01    0     0     0      0     0     0   0
Director    12/31/00    0     0     0   100000   0     0   0

Edward L.
Kunkel, Esq.12/31/02    0     0     0     0      0     0   0
Director    12/31/01    0     0     0     0      0     0   0
            12/31/00    0     0     0     0      0     0   0

Merton Dick 12/31/02    0     0     0     0      0     0   0
Van Orden,  12/31/01    0     0     0   50000    0     0   0
Director    12/31/00    0     0     0   25000    0     0   0

</TABLE>

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

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

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

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

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

     None; not applicable.

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

     Other than as discussed below, we have no other compensation arrangements
with any of our directors or executive officers or our Advisory Board members.

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

     Effective June 15, 1994, our Board of Directors adopted resolutions
providing for us to pay our directors $500 per month.  At the option of each
director, we may pay the fee in shares of "restricted securities" of our
common stock.  Directors shall also be reimbursed for direct out-of-pocket
expenses for attendance at Board meetings and for expenses incurred on our
behalf.

     Due to lack of funding, we have not made any payments pursuant to these
resolutions.  We will not make any payments to our directors until we have
received substantial additional funding for our operations.  We can not
guarantee that we will ever receive this funding.

     Effective October 1, 2000, while serving on the Advisory Board, Merton
Dick Van Orden was to receive 25,000 "unregistered" and "restricted" shares
of our common stock per quarter, and Messrs. Morrison, Meiselman, Regelsen and
Terry will receive 12,500 unregistered" and "restricted" shares of our common
stock per quarter, for service on the Medical Advisory and Applications Board
of Directors.  For services rendered prior to their designation to the
Advisory Board, Mr. Van Orden was issued an additional 25,000 shares; Messrs.
Morrison, Meiselman and Terry will each receive an additional 12,500 shares;
and Dr. Regelsen will receive an additional 37,500 shares.  Mr. Van Orden
resigned to pursue other activities on June 1, 2001; and Dr. Regelsen died
during the first quarter of 2003.

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

     On September 23, 1993, our Board of Directors entered into Employment
Agreements with Dr. Drees and Mr. Hargreaves for a seven-year period beginning
on August 1, 1993.  These Employment Agreements have been extended through
January 22, 2007; however, Mr. Hargreaves died in June, 2003.

     The Employment Agreements call for a base salary of $120,000 to Dr. Drees
and $72,000 to Mr. Hargreaves annually.  We are to provide insurance benefits,
home office reimbursement and an automobile and to reimburse Dr. Drees and
Mr. Hargreaves for out of pocket expenses.  On June 2, 1994, Dr. Drees and Mr.
Hargreaves agreed to cancel all outstanding accruals for expenses under the
Employment Agreements and to accept as full satisfaction of all of their
claims against us the payments they received in November, 1993.  In addition
the Employment 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
Employment Agreements.  Beginning September 1, 1994, Dr. Drees and Mr.
Hargreaves were entitled to receive one-half the salary specified until we
have raised $1,500,000 in debt or equity funding.   All funds raised since the
completion of our reorganization with Sanguine California are being counted
in arriving at this sum.

     As of December 31, 2002, a total of $748,000 in salaries had accrued; Mr.
Hargreaves was paid $36,000 during fiscal 2002 (accrued); and $72,000 in
fiscal
2001.

     On June 10, 2000, 300,000 shares of common stock were issued to Mr.
Hargreaves for additional services valued at $75,000.  These shares were
registered on Form S-8 of the Securities and Exchange Commission and were
subject to lock-up conditions prohibiting their public resale until May 7,
2001.

     We and Edward L. Kunkel, Esq., who is one of our directors, executed an
Employment Agreement on June 1, 1994.  The Employment Agreement provided for
Mr. Kunkel to receive $500 per month or $500 worth of our "unregistered" and
"restricted" common stock, provided that no compensation was to be payable
until we had received operating funds totaling at least $1,000,000 cash.  We
have been unable to get the funding, and we have not yet paid this
compensation.  The Employment Agreement was for a one year term, subject to
renewal by the parties.  As of the date of this Annual Report, we have not
renewed this Employment Agreement.

     Mr. Kunkel's Employment Agreement irrevocably granted to Mr. Kunkel the
option to purchase 10,000 "unregistered" and "restricted" shares of our common
stock, exercisable in whole or in part until May 31, 1997.  This date had been
extended to May 31, 2002, and has expired.

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

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

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

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

                                            Date Report        Date Report
Filer                 Transaction               Due               Filed
-----                 -----------               ---               -----

<S>                   <C>                       <C>               <C>

Thomas C. Drees       Disposition of            04/01            06/12/01
Ph.D.                 1,000,000 shares

S. C. S., Inc.        Acquisition of            12/03            05/12/04
</TABLE>              1,000,000 shares

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

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

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

<TABLE>
<CAPTION>

                                         Number of Shares        Percent
Name and Address                        Beneficially Owned       of Class (1)
----------------                        ------------------       --------
<S>                                          <C>                   <C>

Thomas C. Drees, Ph.D., MBA                    8,804,133            22.8%
101 East Green Street, #11
Pasadena, California  91105

David E. Nelson, CPA                             100,150              .2%
528 14th Avenue
Salt Lake City, Utah  84103

Edward L. Kunkel, Esq.                            50,000              .1%
16 N. Marengo Ave, #517
Pasadena, California  91103
                                               ---------            -----
All directors and officers as a group          8,954,283            23.1%
(three persons)
</TABLE>
                         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                    8,804,133            22.8%
101 East Green Street, #11
Pasadena, California  91105

SCS, Inc.
Suite 200, 455 East 500 South
Salt Lake City, Utah 84111                     2,540,000             6.6%
                                              ----------            -----
Total of all five percent                     11,344,133            29.4%
stockholders
</TABLE>

               * Based upon 38,636,976 shares of outstanding common stock.

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

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

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

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

     An unsecured note payable to an officer of our Company (our President)
due on demand, payable through the issuance of 1,600,000 shares of common
stock as repayment for personally held shares of that officer that were issued
as payment of a Company obligation.  The face value of the note of $699,200 is
based on the market price per share on the date of transfer by the officer.
Interest is computed at 12% per annum.

     An unsecured note payable to an officer of our Company (our President),
due on demand, payable through issuance of 1,000,000 shares of common stock as
repayment for personally-held shares of that officer that were issued as
payment of a Company obligation.  The face value of the note of $220,000 is
based on the market price per share on the date of transfer by the officer.
Interest is computed at 12% per annum.

     Unsecured notes payable to an officer of our Company (our President) in
the amount of $198,943, due on demand, with interest at 12% per annum.  The
unpaid principal balance was $160,777 at December 31, 2002.

     Accrued interest on related party notes totaled $294,091 at December 31,
2002, while interest expense on the related party notes totaled $127,580 and
$127,735 for the years ended December 31, 2002 and 2001, respectively.

     Accounts payable at December 21, 2002 includes amounts owed to an officer
(our President) of the Company for reimbursement of expenses paid of $187,805.

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

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

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

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

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

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

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

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

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

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

Reports on Form 8-K


Exhibits*

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

8-K Current Report dated January 19, 2001,      Part I
respecting the IriSys Service Agreement.**


8-K Current Report dated December 11, 2002,     Part I
as amended, respecting the change in accountants.**

          (ii)

Exhibit
Number
Description
------               -----------
 14           Code of Ethics

 23.1         Consent of TANNER + CO.

 23.2         Consent of HJ Associates & Consultants, LLP

 31.1         302 Certification of Thomas C. Drees

 31.2         302 Certification of David E. Nelson

 32           906 Certification

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

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

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

     The following is a summary of the fees billed to us by our
principal accountants during the calendar years ended December 31, 2002, and
December 31, 2001:

     Fee category                      2002           2001
     ------------                      ----           ----

     Audit fees                        $8,851         $15,779

     Audit-related fees                $  0           $   455

     Tax fees                          $  0           $   0

     All other fees                    $  0           $   0

     Total fees                        $8,851         $16,234

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

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

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

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

                                SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this 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: 6/2/04                          By /s/ Thomas C. Drees
      ---------------                  -------------------------------------
                                         Thomas C. Drees, Ph.D., MBA
                                         CEO, President and Chairman of the
                                         Board of Directors

Date: 6/1/04                          By /s/ David E. Nelson
      ---------------                  -------------------------------------
                                        David E. Nelson, CPA
                                        CFO and Director
<PAGE>