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

                           FORM 10-KSB/A-1

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

     For the fiscal year ended December 31, 2005

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

     For the transition period from _____________ to ____________

                   Commission File No. 000-24480

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

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

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

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

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

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

                    $0.001 par value common stock

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

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

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

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

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


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

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

                Issuers Involved in Bankruptcy Proceedings
                        During the past Five Years

     Not Applicable.

                   Applicable Only to Corporate Issuers

     State the number of shares outstanding of each of the Registrant's
classes of common equity, as of the latest practicable date: October 4, 2006 -
81,683,658 shares of common stock.

                    Documents Incorporated by Reference

     See Part III, Item I.

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

This 10KSB is being amended because the Company determined it should have
accounted for the potential risk of being unable to issue registered common
stock for the warrants if they are exercised.  We have only included Item 6,
Management's Discussion and Analysis and Item 7, Financial Statements in this
amended filing.

<PAGE>
                              PART I
Item 6.  Management's Discussion and Analysis or Plan of Operation.
         ----------------------------------------------------------

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

General.
--------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     We realized a net loss of $337,751 for the year ended December 31, 2005,
and a net gain of $843,384, with a gain of $0.02 per share during the calendar
year ended December 31, 2004.  Most of our expense related to the value of
equity securities issued by us for services rendered.

     Our research and development expenses were $181,246 in 2005, compared to
$14,823 in 2004.  The decrease in 2004 was principally the result of our
limited capital resources.

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

     As of December 31, 2005, we had $159,466 in cash, with $110,134 in
current liabilities.

     During the calendar year ended December 31, 2005, we had net expenses of
$348,032, while receiving $1,019 in revenues.  We received $15,424 in
revenues, and had total expenses of $518,345 during the calendar year ended
December 31, 2004.  Most of these expenses related to the value of equity
securities issued by us for services rendered.

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

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

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

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

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

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

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

     The financial statements in this Annual Report are being amended to
account for the potential risk to the Company of being unable to issue
registered common stock for certain outstanding warrants.
<PAGE>
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A DEVELOPMENT STAGE COMPANY)

                CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 2005
<PAGE>







                         C O N T E N T S


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

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

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

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

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

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

<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors of
Sanguine Corporation
Pasadena, California

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

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

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

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

As discussed in Note 7, the consolidated financial statements for the year
ended December 31, 2005 and 2004 have been restated to correct an error
associated with the accounting for the potential risk of being unable to issue
registered common stock for certain warrants upon their exercise.

/s/HJ Associates & Consultants, LLP

HJ Associates & Consultants, LLP
Salt Lake City, Utah
March 23, 2006, except for Note 7
for which the date is August 31, 2006

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

                              ASSETS

                                                             December 31,
                                                                2005
                                                          (Restated)
CURRENT ASSETS

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

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

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



              LIABILITIES AND STOCKHOLDERS' DEFICIT

                                                             December 31,
                                                                2005
                                                          (Restated)

CURRENT LIABILITIES

   Related party payables (Note 2)                            $     4,000
   Accounts payable                                                63,493
Warrant Liability                                               21,328
   Accrued compensation (Note 3)                                   21,313
                                                              -----------
  Total Current Liabilities                                    110,134
                                                              -----------
COMMITMENTS AND CONTINGENCIES (Note 3)

STOCKHOLDERS' EQUITY

 Common stock: 200,000,000 shares authorized of
  $0.001 par value, 80,708,658 shares issued and
  outstanding                                                      80,709
 Additional paid-in capital                                     5,710,086
Deficit accumulated during the development stage            (5,740,196)
                                                              -----------
  Total Stockholders' Equity                                    50,599
                                                              -----------
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $   160,733
                                                              ===========

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

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

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

   Professional fees                   76,231      357,578        2,741,454
   Research and development           181,246       14,823        1,538,216
Selling, general & administrative   90,555      145,944       2,493,481
                                   ----------    ---------     ------------
  Total Operating Expenses            348,032      518,345        6,773,151
                                   ----------    ---------     ------------
LOSS FROM OPERATIONS                 (347,013)    (502,921)      (6,596,952)
                                   ----------    ---------     ------------
OTHER INCOME (EXPENSE)

 Interest income                        9,262          616           37,335
 Interest expense                           -     (103,814)        (667,466)
 Loss on cash deposit                       -            -          (10,020)
 Gain on settlement of debt                 -    1,449,503        1,496,907
                                   ----------    ---------     ------------
  Total Other Income (Expense)          9,262    1,346,305          856,756
                                   ----------    ---------     ------------
NET INCOME (LOSS)               $ (337,751)   $ 843,384   $ (5,740,196)
                                   ==========    =========      ============
BASIC INCOME (LOSS) PER SHARE      $    (0.00)   $    0.02
                                   ==========    =========
DILUTED INCOME PER SHARE           $    (0.00)   $    0.02
                                   ==========    =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING BASIC                  80,322,502   40,051,302
                                   ==========   ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DILUTED                80,322,502   48,807,880
                                   ==========   ==========

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

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

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

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

Contributed capital by
officer                          -       -        750         -             -

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-8
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
           Statements of Stockholders' Deficit (Continued)

                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance, December 31,
1997                    20,977,723 $20,977  $ 606,176     $     - $(1,125,108)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Amortization of prepaid
expenses                         -       -          -      43,125           -

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

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

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

Warrants issued for
services                         -       -    989,956           -           -

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

The accompanying notes are an integral part of these consolidated financial
statements.
                               F-10
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
           Statements of Stockholders' Deficit (Continued)

                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance Forward         33,988,607 $33,989 $3,294,642   $(110,885)$(4,191,597)

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

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

Amortization of prepaid
expenses                         -       -          -      14,375           -

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

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

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

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

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

Amortization of prepaid
expenses                         -       -          -     115,741           -

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


The accompanying notes are an integral part of these consolidated financial
statements.
                               F-11
<PAGE>
                      SANGUINE CORPORATION
                  (A Development Stage Company)
           Statements of Stockholders' Deficit (Continued)

                                                                     Deficit
                                                        Expenses   Accumulated
                                            Additional Prepaid with During the
                              Common Stock     Paid In   Common    Development
                           Shares     Amount   Capital    Stock       Stage
Balance Forward         38,636,976 $38,637 $3,586,634   $ (62,943)$(6,245,829)

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

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

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

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

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

Net income for the year
ended December 31, 2004
(Restated)                       -       -          -           -  843,384
                       ----------- ------- ----------  ----------  ----------
Balance,
December 31, 2004
(Restated)              78,942,904  78,943  5,517,066         -(5,402,445)

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

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

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

Net loss for the year
ended December 31, 2005
(Restated)                       -       -          -           -(337,751)
                       ----------- ------- ----------  ----------  ----------
Balance,
December 31, 2005
(Restated)              80,708,658 $80,709 $5,701,436  $    - $(5,740,196)
                       =========== ======= ==========  ========== ===========


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


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

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)                $  (337,751) $  843,384  $ (5,740,196)
 Adjustments to reconcile net loss
 to net cash used by operating
 activities:
  Depreciation and amortization             224           -             4,833
  Common stock issued for services       81,126     268,884         2,515,337
  Stock warrants granted                  8,650           -             8,650
  Interest on beneficial conversion
  feature                                     -           -            25,000
  Legal expense related to beneficial
  conversion feature                          -           -             3,750
  Note payable issued for services            -           -           727,950
  Gain on extinguishments of debt             -     (51,422)          (98,826)
  Gain on conversion of debt to
  equity                                      -  (1,398,081)       (1,398,081)
  Recognition of prepaid expenses and
  expenses prepaid with common stock          -      62,943           456,184
 Changes in assets and liabilities:
  Increase in accounts payable and
  related party payables                 41,020       7,459           391,681
  Increase in accrued interest payable        -     103,814           547,279
  Increase in accrued liabilities             -       7,756            10,125
  Increase in customer deposits               -      45,000            45,000
Increase (decrease) in warrant
   liability                            (43,013)     64,341         21,328
  Increase in accrued salaries           11,188           -           855,188
                                       --------  ----------    --------------
   Net Cash Used by Operating
   Activities                          (238,556)    (45,922)       (1,624,798)

CASH FLOWS FROM INVESTING ACTIVITIES

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

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

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

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


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

CASH PAID FOR:

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

NON-CASH FINANCING ACTIVITIES

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

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

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

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a.  Organization

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

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

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

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

     b.  Accounting Method

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

     c.  Basic and Diluted Income (Loss) Per Share

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


    Loss (numerator)                           $(337,751)  $   843,384
       Shares (denominator)                      80,322,502    40,051,302
       Per share amount                              $ (.00)       $  .02

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

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

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

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

                                                     For the Years Ended
                                                         December 31,
                                                       2005         2004

    Loss (numerator)                           $(337,751)   $  843,384
       Shares (denominator)                      80,322,502    48,807,880
       Per share amount                              $ (.00)       $  .02


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

       d.  Estimates

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

       e.  Income Taxes

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

<PAGE>                         F-16

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

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

       e.  Income Taxes (Continued)

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

                                              2005            2004
                                          (Restated)        (Restated)
       Deferred tax assets:
        NOL Carryover                     $1,011,800      $ 889,700
        Accured Salaries                      16,600         29,900
                                           ---------      ---------
                                           1,028,400        919,600

       Deferred tax liabilities:

       Valuation allowance                (1,028,400)      (919,600)
                                           ---------      ---------
        Net deferred tax asset             $       -      $       -
                                           =========      =========


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

                                               2005            2004
                                             (Restated)     (Restated)

        Book Income                          $ (131,720)   $  328,920
        NOL carryforward                              -      (522,325)
        Stock for Services/Options Expense       21,980       164,405
        Meals and Entertainment                      58             -
        Warranty liability                      (12,405)       29,000
        Change in valuation allowance           122,087             -
                                             ----------    ----------
                                             $        -    $        -
                                             ==========    ==========

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

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

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

       e.  Income Taxes (Continued)

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

       f.  Development Stage

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

       g.  Property and Equipment

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

                                                        December 31,
                                                           2005


        Furniture and fixtures                       $       1,491

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

       h. Revenue Recognition

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


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


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

       i.      Newly Adopted Accounting Pronouncements

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

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

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

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

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

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

     i.   Newly Adopted Accounting Pronouncements (continued)

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

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

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


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

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

     i.  Newly Adopted Accounting Pronouncements (Continued)

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

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

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

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

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

     i.  Newly Adopted Accounting Pronouncements (Continued)

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


       j.  Equity Securities

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

       k.  Stock Options

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

       l.      Valuation of Options and Warrants

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

        m.  Cash and Cash Equivalents

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


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

NOTE 2 - RELATED PARTY TRANSACTIONS

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

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

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

NOTE 3 - COMMITMENTS AND CONTINGENCIES

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

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

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

       Employment Agreements

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

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

       License Agreement

       During February and April 2002, the Company entered into a 25 year
       exclusive license agreement with an entity by granting the exclusive
       license rights to its PHER-02 product and associated processes and
       technologies.  This entity has been granted this exclusive license
       for Asia, including the People's Republic of China, Thailand, Laos,
       Cambodia, Vietnam, Singapore, Malaysia, Indonesia, North Korea,
       Burma, Mongolia and Taiwan.
<PAGE>                         F-23
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)

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

NOTE 4 - COMMON STOCK TRANSACTIONS

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

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

NOTE 5 - STOCK OPTIONS AND WARRANTS

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

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

     During March 2002, and in connection with the issuance of a convertible
     debenture, the Company issued warrants to purchase 5,937,500 shares of
     common stock at an exercise price of the greater of $0.08 or 66 2/3% of
     the five-day trading average of the Company's common stock.  The Company
     recognized $682,465 in expense associated with the issuance of these
     warrants.      Subsequent to the filing of our Form 10KSB for the year
     ended December 31, 2005, the Company determined it should have accounted
     for the potential risk of being unable to issue registered common stock
     for the warrants if they are exercised.  Under the Subscription
     Agreement, if the Company is unable to issue the common stock when the
     warrants are exercised, it is required to pay the holders of the warrants
     a sum equal to the closing price of the common stock on the trading date
     immediately preceding the date notice is given for exercise of the
     warrants, less the purchase price.  A substantial number of the original
     warrants have been exercised and the related shares issued.  The Company
     has determined the risk of this liability occurring relating to the
     remaining warrants outstanding to be 10 percent and has booked a
     liability accordingly.

     Through December 31, 2000, a total of 3,744,385 of these warrants have
     been exercised with 2,193,115 remaining outstanding.

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

NOTE 5 - STOCK OPTIONS AND WARRANTS (Continued)

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


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

                              Outstanding                   Exercisable

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

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

NOTE 6 - GOING CONCERN

       The Company's consolidated financial statements are prepared using
       generally accepted accounting principles applicable to a going
       concern, which contemplates the realization of assets and liquidation
       of liabilities in the normal course of business.  The Company has
       historically incurred significant losses, which have resulted in an
       accumulated deficit of $5,740,196 at December 31, 2005, which raises
       substantial doubt about the Company's ability to continue as a going
       concern.  The accompanying financial statements do not include any
       adjustments relating to the recoverability and classification of
       asset carrying amounts or the amount and classification of
       liabilities that might result from the outcome of this uncertainty.
       The Company's management has taken certain steps to maintain its
       operating and

<PAGE>                         F-25
               SANGUINE CORPORATION AND SUBSIDIARY
                  (A Development Stage Company)
          Notes to the Consolidated Financial Statements
                    December 31, 2005 and 2004

NOTE 6 - GOING CONCERN (continued)

       financial requirements in an effort to enable the
       Company to continue as a going concern until such time that revenues
       are sufficient to cover expenses, including:

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

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


NOTE 7 - CORRECTION OF AN ERROR

     Subsequent to the filing of our Form 10KSB for the year ended December
     31, 2005, the Company determined it should have accounted for the
     potential risk of being unable to issue registered common stock for the
     warrants if they are exercised.  As discussed in Note 5, under the
     Subscription Agreement, if the Company is unable to issue the common
     stock when the warrants are exercised, it is required to pay the holders
     of the warrants a sum equal to the closing price of the common stock on
     the trading date immediately preceding the date notice is given for
     exercise of the warrants, less the purchase price.  A substantial number
     of the original warrants have been exercised and the related shares
     issued.  The Company has determined the risk of this liability occurring
     relating to the remaining warrants outstanding to be 10 percent and has
     booked a liability accordingly.  The effect of the restatement is as
     follows:

Consolidated Statement of Operations for the year ended December 31, 2005

                          As  Reported      As  Adjusted      Effect of Change

     Revenues              $   1,019          $   1,019          $       -

     Expenses                391,045            348,032            (43,013)
                           ---------          ---------          ---------
     Loss from operations  $(390,026)         $(347,013)         $ (43,013)
                           =========          =========          =========

Consolidated Statement of Operations for the year ended December 31, 2004

                          As  Reported      As  Adjusted      Effect of Change

     Revenues              $  15,424          $  15,424          $       -

     Expenses                454,004            518,345            (64,341)
                           ---------          ---------          ---------
     Loss from operations  $(438,580)         $(502,921)         $ (64,341)
                           =========          =========          =========

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

NOTE 7 - CORRECTION OF AN ERROR (continued)

     Consolidated Balance Sheet as of December 31, 2005

                          As  Reported      As  Adjusted      Effect of Change

     Current liabilities     $    88,806     $   110,134       $ 21,328

     Deficit accumulated
      during the development
      stage                  $(5,718,868)    $(5,740,196)      $(21,328)

     Consolidated Balance Sheet as of December 31, 2004

                          As  Reported      As  Adjusted      Effect of Change

     Current liabilities     $    46,198     $   110,539       $ 64,341

     Deficit accumulated
      during the development
      stage                  $(5,338,104)    $(5,402,445)      $(64,341)


Consolidated Statement of Cash Flows for the year ended December 31, 2005


                          As  Reported      As  Adjusted      Effect of Change

     Net income             $(380,764)       $(337,751)        $ (43,013)

     Increase (decrease) in
       Warrant liability    $       -        $ (43,013)        $ (43,013)

Consolidated Statement of Cash Flows for the year ended December 31, 2004


                          As  Reported      As  Adjusted      Effect of Change

     Net income             $ 907,725        $ 843,384        $ (64,341)

     Increase (decrease) in
       Warrant liability    $       -        $  64,341        $  64,341




                               F-27
<PAGE>

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

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

     See below, for Exhibits that are incorporated herein by reference.

Exhibits Incorporated by Reference.*
------------------------------------
          (i)
                                          Where Incorporated
                                            in this Report
                                            --------------

10-KSB for the fiscal year ended           Part I, Item 1
December 31, 2002.**

10-KSB for the fiscal year ended            Part I, Item 1
December 31, 2003.**

8-K/A Current Report dated                  Part II, Item 8
December 11, 2003.**

8-K Current Report dated                    Part I, Item 1 &
September 29, 2004.**                       Part III, Item 12

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

          (ii)

Exhibit
Number               Description
------               -----------
 23.1         Consent of HJ Associates & Consultants, LLP

 31.1         302 Certification of Thomas C. Drees, Ph.D.

 31.2         302 Certification of David E. Nelson

 32           906 Certification

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

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

                                SIGNATURES

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

                                       SANGUINE CORPORATION




Date: 10/17/2006                     By /s/ Thomas C. Drees
      ---------------                   -------------------------------------
                                        Thomas C. Drees, Ph.D., MBA
                                        CEO, President and Chairman of the
                                        Board of Directors

Date: 10/17/2005                     By /s/ David E. Nelson
      ---------------                   -------------------------------------
                                        David E. Nelson, CPA
                                        CFO and Director
<PAGE>