<PAGE>












































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

                          FORM 10-KSB

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

     For the fiscal year ended December 31, 1996

[ ]  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:  (818) 405-0079


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

Securities Registered under Section 12(b) of the Exchange Act:   None
Name of Each Exchange on Which Registered:             None
Securities Registered under Section 12(g) of the Exchange Act:   $0.001 par
value common stock 

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

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

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

State Issuer's revenues for its most recent fiscal year:   December 31, 1996 - 
$3

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

     April 11, 1997 - $6,208.44.  There are approximately 6,208,440 shares of
common voting stock of the Company held by non-affiliates.  During the past
two years there has been no "established public market" for shares of common
voting stock of the Company, so the Company has arbitrarily valued these
shares based on $0.001 par value per share.

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

                         Not Applicable.

             (APPLICABLE ONLY TO CORPORATE ISSUERS)

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

                          April 11, 1997

                            20,877,723

          
               DOCUMENTS INCORPORATED BY REFERENCE

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

Transitional Small Business Issuer Format   Yes  X   No ___

<PAGE>

                              PART I

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

          On March 11, 1996, the holders of a majority of the issued and
outstanding shares of common stock of Sanguine Corporation, a Nevada
corporation (the "Company"), resolved to appoint Holomon J. Nicholas, II, and
David E. Nelson, CPA, to the Board of Directors of the Company, to serve until
the next annual meeting of stockholders or until their prior resignation or
termination.
 
          The Board of Directors of the Company resolved on June 24, 1996, to
issue 200,000 shares of "unregistered" and "restricted" common stock to A.
Smith & Associates in full payment of certain cash loans, totaling $49,554.24,
made to the Company during the period September 1, 1995, through June 6, 1996.
 
          On July 8, 1996, the Board of Directors authorized the issuance of
10,000 "unregistered" and "restricted" shares of common stock to W. Eric
Roberts in consideration of the sum of $2,500, with such shares to have
"piggyback" rights, i.e., registration rights in the event that the Company
determines to undertake a registered offering of its securities in the future.
As of the date of this Report, the Company has no plans to undertake any such
offering in the foreseeable future. 

          At a special meeting held on September 24, 1996, the Board of
Directors resolved (i) to issue to Holomon J. Nicholas, II, the Company's
President and Chief Executive Officer, 400,000 "unregistered" and "restricted"
shares of its common stock; (ii) to amend its resolution of November 13, 1995,
to provide for the issuance of an additional 500,000 "unregistered" and
"restricted" shares to Mr. Nicholas, 250,000 of which are to be issued if Mr.
Nicholas is successful in raising at least $5,000,000 during the following 12
to 18 month period, and 250,000 of which are to be issued if he is successful
in raising at least $10,000,000 during the next 12 to 18 month period; (iii)
to issue to Anthony G. Hargreaves, its Secretary/Treasurer, 529,358
"unregistered" and "restricted" shares in consideration of past services
rendered to the Company over a six year period; (iv) to issue to Edward L.
Kunkel, Esq., a director of the Company, 50,000 "unregistered" and
"restricted" shares of the Company in consideration of services rendered over
a two year period; and (v) that all of such shares be deemed fully paid and
non-assessable on their issuance.  With the exception of the aggregate of
500,000 shares to be issued to Mr. Nicholas in consideration of fund-raising,
which have not yet been earned, all of these shares were issued on October 9,
1996.

          On October 25, 1996, the Board of Directors of the Company
unanimously resolved to reduce the exercise price of certain options granted
to Leonard W. Burningham, Esq., as outlined in the Company's Consultant
Compensation Agreement No. 1 and as covered by a Registration Statement on
Form S-8, filed with the Securities and Exchange Commission, from $1.25 per
share to $0.25 per share, provided that Mr. Burningham exercise a portion of
such option within 30 days of the date of the resolution sufficient to pay his
then outstanding statement for legal fees of approximately $30,000, and his
agreement to continue to render non-capital raising services to the Company in
exchange for the payment of the remainder of the option shares covered by the
Compensation Agreement at $0.25 per share, and further provided that the
Company shall reimburse him for all out-of-pocket expenses incurred in
rendering any such services. As of December 31, 1996, Mr. Burningham had
exercised options to purchase a total of 125,506 shares of the Company's
common stock. 

          For a discussion of the business development of the Company from
inception to the end of the calendar year ended December 31, 1995, see its
Registration Statement on Form 10-SB-A1, filed with the Securities and
Exchange Commission on August 19, 1994, its Annual Report on Form 10-KSB-A1
for the calendar year ended December 31, 1994, filed on August 2, 1995, and
its Annual Report on Form 10-KSB-A1 for the calendar year ended December 31,
1995, filed on June 17, 1996, each of which is incorporated herein by this
reference.  See Item 13 of this Report.

Business.
---------

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

          Battelle Memorial Institute was retained to assist the Company in
completing the emulsion of perfluoro-decalin and the synthetic surfactants
that make up PHER-O2.  These activities ceased in May, 1994, when the Company
became unable to pay for new Battelle research services.  In the event that
the Company is able to obtain substantial additional funding, as to which no
assurance can be given, it is anticipated that on completion of the
compounding of PHER-O2, Battelle Memorial Institute will perform initial gross
animal tests, which do not require regulatory approval prior to commencement;
however, the data gathered from any such tests will be subject to regulatory
review in the future.  The Company anticipates that it will manufacture
experimental doses of PHER-O2 required to conduct gross animal testing.  

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

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

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

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

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

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

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

          3.   Universal match for all blood types;

          4.   May be mass-produced;

          5.   Has a three-year shelf life;

          6.   May be stored at room temperature; 

          7.   Has controllable circulatory half-life; and

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

          9.   PHER-O2 is a second generation drug from Fluosol-DA, the only
synthetic red blood cell approved by the Food and Drug Administration.

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

          Blood transfusion represents a vast market for synthetic blood.  The
limited supply of donated blood is the largest constraint on the number of
transfusions given annually.  If a blood substitute were widely available,
more transfusions could be given to those who desperately need them.

          The Company hopes to fill this need with PHER-O2.  The key
ingredients in PHER-O2 are readily available in the U.S. from many
manufacturers.  When combined in the Company's proposed factory, using the
Company's proprietary emulsion process, the result will be a plentiful
alternative to donated human blood. 

          Another disadvantage to the use of human blood in transfusions is
the waiting period while the donor's blood is being matched to the
recipient's.  Because it is believed PHER-O2 does not need to be matched to
the recipient's blood type, the use of PHER-O2 would eliminate this
potentially fatal wait.

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

          PHER-O2's anticipated ability to carry up to four times the oxygen
of human blood makes it promising for many medical applications in which
increased oxygenation is vital.  PHER-O2 molecules are up to 900 times smaller
than human red blood cells.  The Company believes that this fact will make
PHER-O2 particularly useful for oxygenating organs through blocked arteries,
which are the primary cause of heart attack and stroke.

          One of the Company's erstwhile competitors has obtained FDA approval
for the use of a similar product in angioplasty, the treatment of blocked
arteries with small inflated balloons.  This application involves the
injection of the blood substitute into the artery past the inflated balloon. 
As a result, the heart receives more oxygen, the treating physician can keep
the balloon inflated longer and the angioplasty is more effective than it
would otherwise be.  This competitor has recently announced that it will no
longer manufacture its product, leaving Sanguine well-positioned in this
market segment.  See the caption "Competition" of this Item.

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

          The treatment of head and neck tumors is another promising
application for PHER-O2.  Increased oxygenation of these tumors makes them
more susceptible to the effects of chemotherapeutic drugs.  Another potential
benefit of PHER-O2, though little understood, is the ability of oxygen-rich
blood to cause a tumor to produce hydrogen peroxide, which in turn tends to
shrink the tumor.
                                             
          Finally, the perfluoro-decalin molecule in PHER-O2 works as a
radiopaque agent in X-ray imaging and as a contrast agent in nuclear magnetic
resonance (NMR) imaging and CAT scans.  However, unlike many
currently-available imaging agents, PHER-O2 has no known side effects. 

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

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

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

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

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

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
----------------
 
          Assuming the Company's product is proven efficacious for one or more
applications and receives requisite regulatory approval, the Company's success
will depend in part on its ability to obtain patents, protect trade secrets
and avoid infringing the proprietary rights of others.  On September 28, 1992,
Sanguine California filed a patent application for the PHER-O2 surfactant and
micro-emulsion technology with the U.S. Patent Office and received patent
pending status on the same date.  In 1994, the Company and Battelle Memorial
Research Institute developed three other proprietary synthetic blood compounds
using newly developed surfactants, for which the Company intends to file the
necessary patent applications.  However, the patent position of biotechnology
companies in general is highly uncertain and involves complicated factual and
legal questions.  The Company can provide no assurance that it will receive a
patent for PHER-O2 or any other property for which a patent is sought. Nor can
the Company provide any assurance that any issued patents will give it any
competitive advantage, that competitors' patents will not adversely affect the
Company's business, or that competitors will not develop similar products that
are beyond the scope of the Company's patents.

          On March 28, 1991, Sanguine California and BioLogix, entered into a
10-year License Agreement whereby Sanguine California granted to BioLogix
certain license rights to manufacture and market PHER-O2 (the "License
Agreement").  Under the License Agreement, as amended on September 28, 1991, 
Sanguine California granted to BioLogix the exclusive right to manufacture and
market PHER-O2 in Canada, including any future Canadian patent rights, and the
exclusive right to market PHER-O2 in U.S. military pre-hospital markets (i.e.,
non-hospital emergency markets such as ambulances, fire and rescue vehicles
and out-patient clinics).  The consideration for these rights was the payment
by BioLogix to Sanguine California of $100,000.

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

          On December 9, 1993, the Company entered into an Agreement with
Battelle Memorial Institute, through its Battelle Columbus Operations (the
"Battelle Agreement"), for research and development of the use of surfactants
to form a stable microemulsion using the Company's perfluorocarbon for use as
a blood substitute.  Terms under the initial Battelle Agreement provided for
the payment of $62,500 by the Company for these services, and an additional
$162,500 under an extension dated April 7, 1994 (the "Battelle Extension"). 
The Company retains all rights to any inventions discovered; Battelle is
required to provide periodic reports to the Company and keep all information
confidential; and either party may terminate the Battelle Agreement on fifteen
days' written notice, and Battelle may terminate on ten days' written notice
of default in any payment due from the Company, unless payment is received. 
In the event of termination, Battelle is required to provide the Company with
all reports, materials or other deliverable items available as of such date.  

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

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

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

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

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

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

          Pre-clinical testing is generally conducted in animal or in vitro
models to evaluate the potential efficacy and safety of a compound before it
is administered to humans.  The results of these studies are submitted to the
FDA as part of an Investigational New Drug application ("IND"), which must be
approved before human clinical testing can begin.  No tests of any nature
whatsoever have yet been run on PHER-O2.

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

          Clinical trials are typically conducted in three sequential phases,
but the phases may overlap.  In the first phase, the product is usually
infused into a limited number of human subjects and will be tested for safety
or adverse effects, dosage tolerance and pharmacokinetics (clinical
pharmacology).  The second phase involves studies in a somewhat larger patient
population to identify possible adverse effects and safety risks and to begin
gathering preliminary efficacy data.  The third phase of trials will be
undertaken to further evaluate clinical efficacy and to further test for
safety within an expanded patient population at geographically dispersed
clinical study sites.  Although the Company believes its product is
substantially different from other blood substitute products, there can be no
assurance that the Company will not encounter problems in clinical trials
which will cause the Company to delay or suspend clinical trials.

          In the case of biologic products such as PHER-O2, the results of
pharmaceutical development and the pre-clinical and clinical testing are
submitted to the FDA in the form of a Product License Application ("PLA"),
which must be approved before commercial sales may begin.  The Company must
also file an Establishment License Application ("ELA") which describes the
manufacturing process for the product and the facility at which the product
will be produced.  The FDA may respond to the PLA and the ELA by granting a
license for the manufacture of the product from a designated facility and
the commercial sale of the product or by denying the application if it finds
that the application does not meet the criteria for regulatory approval,
requires additional testing or information or requires post-marketing testing
and surveillance to monitor the safety of the Company's product if they do not
view the PLA as containing adequate evidence of the safety and efficacy of the
drug.  Notwithstanding the submission of such data, the FDA may ultimately
decide that the application does not satisfy its regulatory criteria for
approval.  The testing and approval process is likely to require substantial
time and effort.  There can be no assurance that approval will be granted for
the Company's product or its proposed facilities on a timely basis, if at all.

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

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

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

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

          In calendar years 1993, 1994 and 1995, the Company, through its
wholly-owned subsidiary, Sanguine California, expended a total of $300,979 on
research and development.  As neither the Company nor Sanguine California
presently has any customers, none of the cost of these activities was borne
directly by customers.

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

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

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

          The Company leases approximately 970 square feet of office space
located at 101 East Green Street, Suite 11, Pasadena California, 91105, at a
base rent of $1308 per month.

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

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

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

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

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

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

Item 4.  Submission of Matters to a Vote of Security Holders.
         ----------------------------------------------------
         On March 11, 1996, Thomas D. Drees, Ph.D., and Anthony G. Hargreaves,
who collectively held in excess of a majority of the issued and outstanding
shares of the Company's common stock, acting without a meeting pursuant to
Section 78.320 of the Nevada Revised Statutes, resolved to elect Holomon J.
Nicholas, II, and David E. Nelson, CPA, to the Board of Directors of the
Company, to serve until the next annual meeting of stockholders or until their
respective successors are elected and qualified or their prior resignations or
termination.  See the caption "Business Development" of Part I, Item 1 of this
Report. 


                                  PART II

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

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

          Until the quarter ended June 30, 1994, and for at least five years
previously, there had been no "public market" for the shares of common stock
of the Company.  The Company's common stock commenced to trade on the "OTC
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD") in the second quarter of 1994; however, there is no "established
trading market" in these shares of common stock. 

          The range of high and low bid quotations for the Company's
common stock during the each quarter of the year ended December 31, 1995 and
each quarter of the calendar year ended December 31, 1996, is shown below. 
Prices are inter-dealer quotations as reported by the NASD  and do not
necessarily reflect transactions, retail markups, mark downs or commissions.

<TABLE>
<CAPTION>
                             STOCK QUOTATIONS*

                                                  BID

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

<S>                                     <C>                 <C>

March 31, 1995                          1-1/2               1

June 30, 1995                           1-1/2               5/8

September 30, 1995                      1-5/8               3/4

December 31, 1995                       1-21/32             1/4

March 31, 1996                          1-1/4               7/8  

June 30, 1996                           1-1/8               1/5

September 30, 1996                      9/16                3/16

December 31, 1996                       15/32               5/16

</TABLE>

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

Holders
-------
          The number of record holders of the Company's common stock as of
April 11, 1997, was approximately 477.

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

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

          The Board of Directors of the Company resolved on June 24, 1996, to
issue 200,000 shares of "unregistered" and "restricted" common stock to A.
Smith & Associates in full payment of certain cash loans, totaling $49,554.24,
made to the Company during the period September 1, 1995, through June 6, 1996.
 
          On July 8, 1996, the Board of Directors authorized the issuance of
10,000 "unregistered" and "restricted" shares of common stock to W. Eric
Roberts in consideration of the sum of $2,500, with such shares to have
"piggyback" rights. 

          At a special meeting held on September 24, 1996, the Board of
Directors resolved (i) to issue to Holomon J. Nicholas, II, the Company's
President and Chief Executive Officer, 400,000 "unregistered" and "restricted"
shares of its common stock; (ii) to amend its resolution of November 13, 1995,
to provide for the issuance of an additional 500,000 "unregistered" and
"restricted" shares to Mr. Nicholas, 250,000 of which are to be issued if Mr.
Nicholas is successful in raising at least $5,000,000 during the following 12
to 18 month period, and 250,000 of which are to be issued if he is successful
in raising at least $10,000,000 during the next 12 to 18 month period; (iii)
to issue to Anthony G. Hargreaves, its Secretary/Treasurer, 529,358
"unregistered" and "restricted" shares in consideration of past services
rendered to the Company over a six year period; (iv) to issue to Edward L.
Kunkel, Esq., a director of the Company, 50,000 "unregistered" and
"restricted" shares of the Company in consideration of services rendered over
a two year period; and (v) that all of such shares be deemed fully paid and
non-assessable on their issuance.  With the exception of the aggregate of
500,000 shares to be issued to Mr. Nicholas in consideration of fund-raising,
which have not yet been earned, all of these shares were issued on October 9,
1996.

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

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

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

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

          Phase III (approximately two years):  In the fourth year, the        
          Company plans to complete overseas testing of PHER-O2, begin sales   
          in Europe and other overseas areas that may have approved PHER-O2 by 
          this time and may begin construction of its  facility for            
          manufacturing, storing, inspecting and shipping PHER-O2.  During the 
          course of Phase III, the Company estimates that it will need to hire 
          additional employees.  During the fifth year, the Company plans to
          complete testing of PHER-O2 in the United States and receive all     
          necessary FDA approvals and begin American and Canadian sales for    
          cancer treatment and angioplasty.  During this period, the Company   
          also plans to complete construction of its manufacturing facility    
          and continue trials of other PHER-O2 applications, including         
          transplant organ preservation and treatment of carbon monoxide       
          poisoning, sickle cell anemia, stroke and heart attack.  During the
          course of the fifth year, Phase III, the Company estimates that it   
          will need to hire additional employees.

          The foregoing cost estimates are based on the prior experiences of
Dr. Thomas C. Drees, the Company's CEO and Chairman of the Board of Directors. 
Dr. Drees has more than 20 years' experience in the blood industry.  See the
caption "Business Experience" of Part I, Item 5. 

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

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

          Revenues for the calendar years ending December 31, 1995 and 1996,
were $6 and $3, respectively, all of which was interest income.

          The Company had a net loss from operations of $366,843 (a loss of
$0.02 per share) during the calendar year ended December 31, 1995, and a net
loss from operations of $209,488 (a loss of $0.01 per share) for the year
ending December 31, 1996.

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

          During the calendar year ended December 31, 1995, the Company had
expenses of $366,849, while receiving $6 in revenues; the Company received
approximately $3 in revenues, and the Company had total expenses of $209,491
during the calendar year ended December 31, 1996.

          The Company is currently unable to pay its debts as they become due. 
These debts include three notes payable, totaling approximately $70,000,
which the Company is unable to pay.  The continuation of the Company's
proposed business operations are subject to the ability of the Company to
raise substantial additional funding, as to which no assurance can be given.

Item 7.  Financial Statements.
         ---------------------
                              
          Financial Statements for the years ended
          December 31, 1996, and December 31, 1995                    

          Independent Auditors Report                               

          Balance Sheet - December 31, 1996 and 1995                

          Statements of Operations Accumulated for the        
          Period January 18, 1989 to December 31, 1996
          and the Years ended December 31, 1996, 1995
          and 1994 

          Statements of Cash Flows Accumulated for the        
          Period January 18, 1989 to December 31, 1996
          and the Years Ended December 31, 1996, 1995 
          and 1994

          Statements of Stockholders' Equity January 1,       
          1990 to December 31, 1996

          Notes to Financial Statements                       

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

          None; not applicable.

                                 PART III

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

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

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

<TABLE>
<CAPTION>

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

Holomon J. Nicholas, II,    President/COO         11/95              *
 MBA                        Director               3/96              *

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

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

</TABLE>

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

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

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

          Thomas C. Drees, Ph.D., MBA, CEO and Chairman of the Board of
Directors. Dr. Drees, age 67, is the founder of Sanguine California.  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 24 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.

          Holomon J. Nicholas, II, President/COO.  Mr. Nicholas, age 46, has
over 23 years experience in Sales and Marketing Management, Strategic
Planning/Corporate Development, Worldwide Marketing/Operations Planning, and
General Management and Venture Financing in medical and diagnostic companies. 
Mr. Nicholas has held executive positions with Baxter International, Inc.,
Warner Lambert, Inc., and Becton Dickinson and Company.  At Baxter
International, Mr. Nicholas was directly responsible for sales and marketing
programs for a number of parenteral product lines.  Since 1989, Mr. Nicholas
has been President of Nicholas Medical, Inc., a consulting company he founded
to assist new companies with funding and management planning.

          Anthony G. Hargreaves, Vice President, Secretary/Treasurer, and
Director.  Mr. Hargreaves is 68 years old.  He is a former Royal Marine
Officer with long experience in marketing, trust department banking (with Bank
of America) and group insurance sales management (with the Connecticut General
Life Insurance Company).  His medical background includes service as General
Manager of VK Limited in Pasadena, California, where Mr. Hargreaves helped
secure funding for a wearable, continuously-operating artificial kidney
machine.  In the early 1980's, Mr. Hargreaves organized and scripted
telemarketing sales of various products to retail stores throughout the United
States.

          David E. Nelson, CPA, Chief Financial Officer and Director.  Mr.
Nelson, age 53, received a B.S. degree in accounting from the University of
Utah in 1966.  He has over 20 years' experience in operations, finance and
regulatory compliance of stock brokerage firms.  He is the past President of
Covey & Company, Inc.  Mr. Nelson has been a member of the NASD Board of
Arbitrators, the American Institute of Certified Public Accountants and
the Utah Association of Certified Public Accountants.  

          Edward L. Kunkel, Esq., Director.  Mr. Kunkel is 49 years of age. 
He graduated with a Juris Doctor degree from the University of Southern
California in 1973.  From 1973 to 1978, he practiced law with the firm of
Karns & Karabian in Los Angeles.  From 1978 to the present, he has practiced
educational law, real estate law and general business law in his own firm. 
Mr. Kunkel is a member of the State Bar of California, the Los Angeles County
Bar Association and the National School Board Attorneys Association; he has
been a licensed real estate broker since 1979.
  
Family Relationships
--------------------

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

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

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

          (1)  Was a general partner or executive officer of any business by   
               or against which any bankruptcy petition was filed, whether at  
               the time of such filing or two years prior thereto;

          (2)  Was convicted in a criminal proceeding or named the 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 from or otherwise limiting the following activities:

               (i)  Acting as a futures commission merchant, introducing       
                    broker, commodity trading advisor, commodity pool          
                    operator, floor broker, leverage transaction merchant,     
                    associated person of any of the foregoing, or as an        
                    investment adviser, underwriter, broker or dealer in       
                    securities, or as an affiliated person, director or
                    employee of any investment company, bank, savings and loan
                    association or insurance company, or engaging in or        
                    continuing any conduct or practice in connection with such 
                    activity;

              (ii)  Engaging in any type of business practice; or

             (iii)  Engaging in any activity in connection with the purchase   
                    or sale of any security or commodity or in connection with 
                    any violation of federal or state securities laws or       
                    federal commodities laws;

          (4)  Was the subject of any order, judgment or decree, not           
               subsequently reversed, suspended or vacated, of any federal or  
               state authority barring, suspending or otherwise limiting for   
               more than 60 days the right of such person to engage in any     
               activity described above under this Item, or to be associated   
               with persons engaged in any such activity;

          (5)  Was found by a court of competent jurisdiction in a civil       
               action or by the Securities and Exchange 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; or

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

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

Cash Compensation
-----------------

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

<TABLE>
<CAPTION>


                                      SUMMARY COMPENSATION TABLE
<S>          <C>        <C>        <C>        <C>        <C>          <C>      <C>        <C>
                                                                  Long Term Compensation
                             Annual Compensation               Awards            Payouts
 
(a)          (b)        (c)        (d)        (e)        (f)          (g)      (h)        (i)
Name and     Year or                          Other      Restricted   Option/  LTIP       All
Principal    Period     $          $          Annual     Stock        SAR's    Payouts    Other
Position     Ended      Salary     Bonus      Compen-    Awards ($)   (#)      ($)      Compensa-
             December                         sation($)                                  tion ($)
             31
                    
Thomas C.      1995      (1)        -0-           -0-      -0-         -0-     -0-        -0-
Drees, Ph.D.   1996      (1)        -0-           -0-      -0-         -0-     -0-        -0-
MBA
CEO and
Chairman of
the Board 
of Directors

Holomon J.     1995      $6,500     -0-           (2)      100 (3)     -0-     -0-        -0- 
Nicholas, II   1996      $6,500     -0-           (2)      400 (3)     -0-     -0-        -0-
MBA

Anthony G.     1995       (1)       -0-           -0-      -0-         -0-     -0-        -0- 
Hargreaves,    1996       (1),(4)   -0-           -0-      529.36(4)   -0-     -0-        -0-
Vice Pres.,
Sec./Treas.
and Director

David E.       1995      -0-        -0-           -0-      -0-         -0-     -0-        -0-
Nelson, CPA    1996      -0-        -0-           -0-      -0-         -0-     -0-        -0-
CFO and
Director

Edward L.      1995      -0-        -0-           -0-      -0-         -0-     -0-        -0-
Kunkel, Esq.   1996      -0-        -0-           -0-      50 (4)      -0-     -0-        -0-
Director

</TABLE>

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

(2)   The Board of Directors of the Company unanimously resolved on November   
      13, 1995, to issue 200,000 "unregistered" and "restricted" shares of the 
      Company's common stock to Mr. Nicholas if and when he is successful in   
      raising at least $5,000,000 in funding for the Company in the 12 to 18   
      month period following the date of the resolution, and an additional     
      200,000 "unregistered" and "restricted" shares to be issued to Mr.       
      Nicholas if and when he is successful in raising at least $10,000,000 in 
      funding for the Company in the 12 to 18 month period following the date  
      of the resolution, all on satisfactory terms to the Board of Directors   
      of the Company. On September 24, 1996, the Board of Directors resolved   
      to amend this resolution to increase the total number of shares to be    
      issued to 500,000 "unregistered" and "restricted" shares, 250,000 shares 
      upon satisfaction of the first contingency, and 250,000 shares upon      
      satisfaction of the second.  As of the date of this Report, none of      
      these shares has been issued pending the satisfaction of each            
      contingency.  See Item 1 of this Report.

(3)   On November 13, 1995, the Board of Directors of the Company unanimously  
      resolved that the Company issue 100,000 "unregistered" and               
      "restricted" shares of its common stock in consideration of Mr.          
      Nicholas' immediate consent to serve as President and Chief Operations
      Officer of the Company.  At a special meeting held September 24, 1996,   
      the Board of Directors resolved to issue to Mr. Nicholas 400,000         
      "unregistered" and "restricted" shares of common stock in consideration  
      of services rendered.  Due to the lack of any "established trading     
      market" in the securities of the Company, these shares have been
      valued at par value, which is one mill ($0.001) per share.  See Item 1   
      of this Report and the financial statements hereto. 

(4)   At a special meeting held on September 24, 1996, the Board of Directors  
      of the Company resolved to issue to Mr. Hargreaves 529,358               
      "unregistered" and "restricted" shares of common stock in consideration  
      of services rendered over a six year period.  Due to the lack of any     
      "established trading market" in the shares of the Company, these shares  
      were valued at $0.001 per share.  See Item 1 of this Report and the      
      Financial Statements hereto. 

(5)   On September 24, 1996, the Board of Directors of the Company resolved to 
      issue to Mr. Kunkel 50,000 "unregistered" and "restricted" shares of     
      common stock in consideration of services rendered over a two year       
      period.  Due to the lack of any "established trading market" in the      
      securities of the Company, these shares have been valued at par value,   
      which is one mill ($0.001) per share.  See Item 1 of this Report and the 
      financial statements hereto.
   
Bonuses and Deferred Compensation
---------------------------------

          None.

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

          None.

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

          None; not applicable.

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

          None.

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

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

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

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

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

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

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

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

          On September 24, 1996, the Board of Directors of the Company
resolved to issue to Mr. Hargreaves 529,358 "unregistered" and "restricted"
shares in consideration of services rendered over the previous six years.  See
Item 1 of this Report and the Summary Compensation Table of this Item.  As of
December 31, 1996, a total of $156,500 in salaries had accrued to Messrs.
Drees and Hargreaves pursuant to the above referenced Letter Agreement.

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

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

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

          A Form 3 Initial Statement of Beneficial Ownership of Securities for
Holomon J. Nicholas, II, was required to be filed with the Securities and
Exchange Commission during the calendar year ending December 31, 1995, and an
Initial Statement for David E. Nelson, CPA, was due in March, 1996. The
Initial Statements of each of these persons were executed by the proper
parties and were filed with the Securities and Exchange Commission on May 2,
1996.
          In addition, Form 5 Annual Statement of Beneficial Ownership of
Securities of Thomas C. Drees, Anthony G. Hargreaves and Edward L. Kunkel were
filed with the Securities and Exchange Commission on February 27, 1997, and an
Annual Statement for Holomon J. Nicholas, II, was filed on March 3, 1997.

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

          The following tables set forth the shareholdings of the Company's
directors and executive officers and those persons who own more than five
percent of the Company's common stock as of April 13, 1997, with the
computations being based upon 21,782,859 shares of common stock being
outstanding.  This figure takes into account the 20,877,723 presently
outstanding shares of common stock; the 470,642 shares subject to an existing
option held by Anthony G. Hargreaves (see footnote 2 below); the 10,000 shares
subject to an existing option held by Edward L. Kunkel, Esq. (see footnote 3
below); the 350,000 shares subject to options held by A. Smith Associates (see
footnote 4 below); and the 74,494 shares subject to an existing option held by
Leonard W. Burningham, Esq (see Item 1 of this Report):


                     DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>

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

<S>                                          <C>                   <C>

Thomas C. Drees, Ph.D, MBA (1)               13,119,133            60.2%
101 East Green Street, #11
Pasadena, California  91105

Holomon J. Nicholas, II, MBA (1)                500,000             2.3%
101 East Green Street, #11
Pasadena, California  91105

Anthony G. Hargreaves (1)                     1,470,642(2)          6.8%
101 East Green Street, #11
Pasadena, California  91105

David E. Nelson, CPA(1)                             150             0.0007%
1492 Spring Lane, #17
Salt Lake City, Utah  84117

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

</TABLE>

All directors and officers as a group (5)    15,149,925            69.6%


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

          (2)   Includes an option to acquire 470,642 shares of "unregistered" 
                and "restricted" common stock of the Company at a price of     
                $0.1275 per share, exercisable until September 22, 2001, which 
                Mr. Hargreaves received in exchange for an option to purchase  
                200,000 shares of common stock of Sanguine California at $2    
                per share under the Sanguine Plan.

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

                         FIVE PERCENT STOCKHOLDERS

<TABLE>
<CAPTION>

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

<S>                                         <C>                   <C>
Thomas C. Drees, Ph.D, MBA                  13,119,133            60.2%
101 East Green Street, #11
Pasadena, California  91105

A. Smith Associates(4)                       1,208,650 (5)         5.6%
455 East 500 South, #201
Salt Lake City, Utah  84111

A.K.S., Inc.(6)                                104,000             0.5%
455 East 500 South, #201
Salt Lake City, Utah  84111                    _______            ______

                                            14,431,783            66.3%

</TABLE>

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

          (5)  Includes 350,000 shares of "unregistered" and "restricted"      
               shares of common stock of the Company covered by the following  
               options granted to A. Smith Associates: 150,000 shares at       
               $60,000, and 200,000 shares at $60,000.  These options have     
               been extended without date by management.

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

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

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

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

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

          With the exception of the Employment Agreements of Dr. Drees and Mr.
Hargreaves, the issuance of 529,358 "unregistered" and "restricted" shares of
common stock to Mr. Hargreaves pursuant thereto, and the stock options granted
to A. Smith Associates, there have been no material transactions, series of
similar transactions or currently proposed transactions, to which the Company
or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or
any security holder who is known to the Company to own of record or
beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.

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

          With the exception of the Employment Agreements of Dr. Drees and Mr.
Hargreaves, the issuance of 529,358 "unregistered" and "restricted" shares of
common stock to Mr. Hargreaves pursuant thereto, and the stock options granted
to A. Smith Associates, there have been no material transactions, series of
similar transactions or currently proposed transactions, to which the Company
or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or
any security holder who is known to the Company to own of record or
beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.

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

          With the exception of the Employment Agreements of Dr. Drees and Mr.
Hargreaves, the issuance of 529,358 "unregistered" and "restricted" shares of
common stock to Mr. Hargreaves pursuant thereto, and the stock options granted
to A. Smith Associates, there have been no material transactions, series of
similar transactions or currently proposed transactions, to which the Company
or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or
any security holder who is known to the Company to own of record or
beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.

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

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

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

          With the exception of the Employment Agreements of Dr. Drees and Mr.
Hargreaves, the issuance of 529,358 "unregistered" and "restricted" shares of
common stock to Mr. Hargreaves pursuant thereto, and the stock options granted
to A. Smith Associates, there have been no material transactions, series of
similar transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be
a party, in which the amount involved exceeds $60,000 and in which any
promoter or founder, or any member of the immediate family of any of the
foregoing persons, had a material interest.

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

Reports on Form 8-K

          None during the past two years.

Exhibits*

          (i)
                                          Where Incorporated       
                                            in this Report         
                                            --------------  
      
Registration Statement on Form 10-SB-A1,       Part I               
filed August 19, 1994**

Annual Report on Form 10-KSB-A1,               Part I            
filed August 2, 1995**

Annual Report on Form 10-KSB-A1,               Part I
filed June 17, 1996**

          (ii)                          
                                                   
Exhibit                                                
Number               Description                                               

------               -----------

 21       Subsidiaries of the Company**                        

 27       Financial Data Schedule

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

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











                                SIGNATURES

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

                                       SANGUINE CORPORATION



Date:  4/17/97                       By /s/ Thomas C. Drees  
      --------------                    -------------------------------------- 
                                        Thomas C. Drees, Ph.D., MBA
                                         CEO and Chairman of the Board of      
                                        Directors

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

                                       SANGUINE CORPORATION



Date: 4/17/97                          By /s/ Thomas C. Drees  
     -------------                       ------------------------------------
                                         Thomas C. Drees, Ph.D., MBA
                                          CEO and Chairman of the Board of     
                                         Directors



Date:  4/17/97                         By /s/ A. G. Hargreaves  
      -------------                       ------------------------------------ 
                                        Anthony G. Hargreaves, Vice President,
                                        Secretary/Treasurer and Director



Date:  4/17/97                        By /s/ Edward L. Kunkel  
      --------------                     ------------------------------------- 
                                        Edward L. Kunkel, Esq.
                                        Director


<PAGE>

      

                           SANGUINE CORPORATION
                       (A Development Stage Company)

                           FINANCIAL STATEMENTS

                             December 31, 1996
                                     &
                             December 31, 1995

                        Independent Auditors Report

Board of Directors
Sanguine Corporation
(A Development Stage Company)

     I have audited the accompanying balance sheets of Sanguine Corporation,
as of December 31, 1996 and 1995, and the related statements of operations,
stockholders  equity, and cash flows for the accumulated period of January 18,
1989 to December 31, 1996, and the years ended December 31, 1996, 1995, and
1994.  These financial statements are the responsibility of the Company s
management.  My responsibility is to express an opinion on these financial
statements based on my audit. 

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

     In my opinion, the aforementioned financial statements present fairly,
in all material respects, the financial position of Sanguine Corporation, as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the accumulated period of January 18, 1989 to December 31, 1996, and
the years ended December 31, 1996, 1995, and 1994, in conformity with
generally accepted accounting principles.

     The accompanying financial statements have been prepared assuming the
Company will continue as a going concern.  As discussed in Note #10 to the
financial statements, the Company has an accumulated deficit and a negative
net worth at December 31, 1996.  These factors raise substantial doubt about
the Company s ability to continue as a going concern.  Management s plans in
regard to these matters are also discussed in Note #10.  The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty. 




Salt Lake City, Utah 
April 10, 1997
<TABLE>

                           SANGUINE CORPORATION
                       (A Development Stage Company)
                               Balance Sheet
                        December 31, 1996 and 1995
<CAPTION>
                                                1996      1995 
                                  ASSETS

<S>                                          <C>       <C>
Current Assets
   Cash                                      $   672   $   712 

Property & Equipment
   Furniture                                   1,924     2,844 

Other Assets
   Refundable Loan Commitment Fee
     (See Note #10)                           10,000    10,000 

          Total Other Assets                  10,000    10,000 
          TOTAL ASSETS                       $12,596   $13,556 

                    LIABILITIES & STOCKHOLDERS  EQUITY
Current Liabilities
   Accounts Payable                          $25,373   $27,626 
   Accrued Salaries                          236,000   140,000 
   Accrued Interest Payable                   22,500    18,000 
   Notes Payable                              69,800    43,400 

          Total Current Liabilities          353,673   229,026 

Stockholders  Equity
   Common Stock, Authorized:
     100,000 Shares at $0.001 Par Value:
     20,877,723 Shares and 19,562,859 
     Shares Issued and Outstanding            20,877    19,562 
   Paid In Capital (Quasi-Reorganized 
     March 20, 1994 Deficit Retained 
     Earnings of $2,423,964 Eliminated)      596,942   513,847 
   Retained Earnings Deficit                (958,896) (748,879)
   
          Total Stockholders  Equity        (341,077) (215,470)
   
          TOTAL LIABILITIES & 
          STOCKHOLDERS  EQUITY               $12,596   $13,556 
</TABLE>
<TABLE>
<CAPTION>

                           SANGUINE CORPORATION
                       (A Development Stage Company)
                         Statements of Operations
     Accumulated for the Period January 18, 1989 to December 31, 1996
           and the Years Ended December 31, 1996, 1995 and 1994

                          Accumulated 
                          January 18, 
                           1989 to 
                          December  December  December  December 
                          31, 1996  31, 1996  31, 1995  31, 1994 
<S>                       <C>       <C>       <C>       <C>
Revenues
   Interest Income        $  4,842  $       3  $      6  $    171 
   Sales Market Rights     150,000        -0-       -0-       -0- 

          Total Revenues   154,842          3         6       171 

Expenses
   Depreciation           $  2,685   $    920  $    920  $    845 
   Research & Development  510,805     93,451   100,720   138,371 
   Insurance                 2,289        515       639       253 
   Office Expenses          63,366     15,035    10,268    16,780 
   Auto Expenses            16,652      1,080     1,084       754 
   Legal & Professional Fees81,841      8,932    31,302    19,999 
   Rent                     50,844     14,622    13,293    14,631 
   Interest Expenses        26,094      6,603     5,710     4,781 
   Travel                   17,879      1,318     1,335     2,187 
   Stock Transfer            2,141        882       231     1,028 
   Consultant Fees         224,177     45,780   178,084       -0- 
   Salaries & Wages         58,108     18,000    18,000     8,250 
   Taxes & Licenses         20,945        381     1,347     1,400 
   Finders Fees              7,825        -0-       -0-       -0- 
   Promotions               28,087      2,500     3,916    21,671 

          Total Expenses  1,113,738   210,019   366,849   230,950 

      Net Profit (Loss)
      From Operations     $(958,896)$(210,016)$(366,843)$(230,779)

      Profit (Loss) Per Share       $    (.01)$    (.02)$    (.01)
   
     Weighted Average Shares
     Outstanding                  19,946,773 17,396,965 16,587,130 
</TABLE>
<TABLE>
<CAPTION>
                              SANGUINE CORPORATION
                         (A Development Stage Company)
                            Statements of Cash Flows
        Accumulated for the Period January 18, 1989 to December 31, 1996
              and the Years Ended December 31, 1996, 1995 and 1994

                               Accumulated 
                               January 18, 
                               1989 to 
                               December    December   December   December 
                               31, 1996    31, 1996   31, 1995   31, 1994 
<S>                            <C>         <C>        <C>        <C>
Cash Flows from Operating Activities
 Net (Loss)                    $(958,896)  $(210,016) $(366,843) $(230,779)
 Adjustments to Reconcile Net (Loss)
 to Net Cash:
  Depreciation                     2,685         920        920        845 
  Non Cash Expense               208,783         529    203,125        -0- 
 Changes in Operating Assets
 & Liabilities:                         
  (Increase) Decrease in Accounts 
    Receivable                       -0-         -0-        -0-      3,750 
  (Increase) in Receivable Offshore
    Corporation                      -0-         -0-      3,300        -0- 
  Increase in Refundable Commitment 
    Fees                         (10,000)        -0-        -0-    (10,000)
  Increase (Decrease)
    Accounts Payable              25,373      79,127    (62,327)    85,364 
  Increase in Interest Payable    22,500       4,500      4,219      4,781 
  Increase in Accrued Salaries   236,000      96,000     96,000     44,000 
 

      Net Cash Flows from 
      Operating Activities      (473,555)    (28,940)  (121,606)  (102,039)

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



Cash Flows from Financing Activities
 (Decrease) Increase in 
  Notes Payable                 $ 69,800    $ 26,400  $  (8,600) $  12,000 
 Sale of Common Stock            327,155       2,500    129,264     75,000 
 Contributed Capital                 750         -0-        -0-        -0- 

      Net Cash Flows from 
      Financing Activities       397,705      28,900    120,664     87,000 

      Increase (Decrease) in Cash    672         (40)      (942)   (19,648)

      Cash at Beginning of Period    -0-         712      1,654     21,302 

      Cash at End of Period     $    672    $    672   $    712   $  1,654 

Disclosure for Cash Flows from:
 Interest                       $  9,491    $  6,602   $  5,710   $  4,781 
 Taxes                               -0-         -0-        -0-        -0- 

Disclosures from Non Cash Transactions:
 Operating Activities 
  Payment of Accounts Payable   $    -0-    $ 80,931   $    -0-   $    -0- 
</TABLE>
<TABLE>
<CAPTION>
                              SANGUINE CORPORATION
                         (A Development Stage Company)
                       Statement of Stockholders  Equity
                      January 1, 1990 to December 31, 1996

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

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

Net Profit Year Ended 
December 31, 1991                                              73,917 

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

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

Contributed Capital by Officer                        750 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rounding                                                           (1)

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

Balance, December 31, 1996 20,877,723 $20,877  $  596,942  $  (958,896)
</TABLE>
   The accompanying notes are an integral part of these financial statements

                           SANGUINE CORPORATION
                       (A Development Stage Company)
                       Notes to Financial Statements

NOTE #1 - Corporate History

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

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

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

     On June 14, 1993 the Company entered into an Agreement and Plan of
Reorganization, wherein it was agreed that Sanguine Corporation (a Nevada
Corporation) would issue 14,589,775 shares of its common stock to acquire 94%
of the issued and outstanding shares of stock of Sanguine Corporation (a
California Corporation).

     From 1974 to 1989, the Company engaged in several business ventures. 
These business activities resulted in the loss of all Company assets.  Because
of the search for a new business venture, the Company has entered into the
development stage company  status again.  Sanguine Corporation (California)
is a development stage company and these financial statements are presented as
those of a development stage company effective January 18, 1989, coinciding
with the incorporation date of Sanguine Corporation (California).

NOTE #2 - Significant Accounting Policies

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

NOTE #3 - Common Stock Public Offering

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

NOTE #4 - Net Operating Losses for Tax Carryforward

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

                      Year of            Expiration 
                         Loss    Amount      Date 
                         1992  $  3,094      2007 
                         1993   149,162      2008 
                         1994   186,779      2009 
                         1995   165,343      2010 
                         1996   209,488      2011 

     The Company has adopted FASB 109 to account for income taxes.  The
Company currently has no issues that create timing differences that would
mandate deferred tax expenses.  Net operating losses would create possible tax
assets in future years.  Due to the uncertainty as to the utilization of net
operating loss carryforwards an evaluation allowance has been made to the
extent of any tax benefit that net operating losses may generate. 
                                                 1996      1995      1994 
Current Tax Asset Value of Net Operating Loss 
  Carryforwards at Current Prevailing Federal 
  Tax Rate                                   $242,715  $171,489  $115,272 
Evaluation Allowance                         (242,715) (171,489) (115,272)
     Net Tax Assets                          $    -0-  $    -0-  $    -0- 
     Current Income Tax Expense                   -0-       -0-       -0- 
     Deferred Income Tax Expense                  -0-       -0-       -0- 

NOTE #5- Quasi-Reorganization

     Pursuant to actions of the Board of Directors on March 30, 1994, the
Company effected a Quasi-Reorganization for the purpose of reducing the
Company s retained deficit to the extent of its paid in capital.  Prior to the
reorganization, the Company (Sanguine Corporation - Nevada) had paid in
capital in excess of par value of $2,423,964 and deficit retained earnings of
$(2,467,736).  The deficit retained earnings was eliminated to the extent of
paid in capital leaving a retained earnings deficit of $(43,772).

NOTE #6- Notes Payable - Short Term

     The Company has three notes payable to three entities.                    
                                                              Amounts 
                                                          1996      1995 
     Note #1 to an individual, due on demand, interest 
     at 10% per annum, with option to the holder to 
     convert to 35,277 shares of common stock to 
     $0.4252 per share.                              $  15,000 $  15,000 

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

     Note #3 to an individual, due September 15, 1995, 
     interest at 12% per annum.                         29,800     3,400 

     Total Current Notes Payable                      $ 69,800  $ 43,400 

NOTE #7 - Property & Equipment

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


     Scheduled below are the assets, costs, lives, and accumulated
depreciation at December 31, 1996 and December 31, 1995. 

                  December 31,          Depreciation         Accumulated   
                  1996    1995             Expense           Depreciation   
Assets            Cost    Cost   Life   1996    1995         1996    1995 
Furniture        $4,609 $4,609      5  $ 920  $  920       $2,685  $1,765 

NOTE #8 - Stock Option

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

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

     The warrants may be exercised at various dates through August 1998. 

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

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

     In December 1996, Counsel exercised options to purchase 125,506 shares
of stock after the exercise there remained 74,494 shares available through the
option agreement. 

NOTE #9 - Refundable Commitment Fee

     The Company has advanced to a funding group in California $10,000 as a
refundable commitment fee.  The funding group proposes to obtain an investor
to commit up to $35,000,000 under a mutually agreed contract in exchange for
43% of the Corporation s stock.  Shares of Stock equal to 43% of the shares
outstanding have been placed in escrow.  The agreement was extended on a month
to month basis but expired in 1995.

NOTE #10 - Lease Commitment

     The Company had a one year lease on its office facilities in California
for the period March 1, 1994 to March 1, 1995 at a total cost of $15,696.  The
Company continues to rent the office space at the monthly rate of $1,308 on a
month to month basis.


NOTE #11 - Going Concern

     The Company has an accumulated deficit of $958,367 at December 31, 1996
and negative cash flows for the year and the proceeding year then ended. 
Until the Company commences business operations, management anticipates that
negative cash flows will continue.  These factors raise substantial doubt
about the Company s ability to continue as a going concern.  The Company seeks
to find a business opportunity to acquire or merge with that will provide
operating capital. 

NOTE #12 - Minority Interest

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

NOTE #13 - Employment Agreement

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

NOTE #14 - Non Cash Investing & Financing Activities

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

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

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

NOTE #15 - Changes in Expense Presentation

     In compliance with ARB 43, Ch 2a, Para 3, the Company changed
presentation of expense classification to Research and Development expense to
compare fairly with 1996 and 1995.  Following is a table of the changes to the
expenses as presented.  Increase (Decrease)

                                        1994 
     Research & Development         $ 57,671  
     Legal Fees                      (19,734)
     Travel                           (2,187)
     Salaries                        (35,750)
     Consultant Fees                     -0- 

          Net Effect of Changes     $    -0-