UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2009~~2010

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

Commission File Number 000-24480

Sanguine Corporation

(Exact name of registrant as specified in 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) (Zip Code)

Issuer's telephone number, including area code: (~~626~~678) ~~405~~352-~~0079~~9060

Securities registered pursuant to section 12(b) of the Act:

Title of each class Name of each exchange on which registered

None N/A

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes [ ]

No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act

Yes [X]

No [ ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.

Yes [X]

No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). The registrant is not yet part of the Interactive Data reporting system.

Yes [ ] No [ ]

No [ ]

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller

~~a smaller~~ reporting company~~. See definitions of “large accelerated filer,~~” ~~“accelerated filer,” and “smaller reporting company”~~ in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)

Smaller reporting company x

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 aggregate market value of the voting stock held by nonaffiliates 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: The average between the bid and ask price as of June 30, ~~2009~~2010, the end of the Registrant second fiscal quarter was $0.1831, giving the shares held by non-affiliates a market value of approximately $~~447~~771,~~774~~165.92. There are approximately 2,487,632 shares of common voting stock of the Issuer beneficially owned by non-affiliates.

As of March 2631, ~~2010~~2011, the Registrant had 6,~~682~~704,~~072~~572shares ~~shares~~ of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., part I, part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or other information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933: NONE

NONE

PART I

ITEM 1. BUSINESS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This periodic report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management. Statements in this periodic report that are not historical facts are hereby identified as “forward-looking statements.”

Business Development.

Developmental Information for the Year Ended December 31, 2006.

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

On October 18, 2006, our Board of Directors resolved to offer for sale in a private placement 353,333 shares of our common stock that are “restricted securities” to “accredited investors” at $1.20 per share for aggregate gross proceeds of $400,000. This offering was closed on February 12, 2007, with 37,333 shares having been sold for gross proceeds of approximately $44,800.

Developmental Information for the Year Ended December 31, 2007

Effective January, 2007 we extended the expiration dates of 97,156 outstanding warrants to purchase shares of our common stock at $1.60 per share to March, 2008, or a year from the date on which they were scheduled to expire.

On November 21, 2007, we executed a Consulting and Confidentiality Agreement for a 12 month term with KKS Venture Management, Inc. (“KKS”) and Alfonso C. Knoll (“Knoll”), its principal, whereby KKS was engaged to provide consulting services. KKS agreed to exercise its best efforts to provide us with help in gaining market awareness and exploring the possibilities of a European listing; recommending a capitalization restructure to facilitate an offering of $5,000,000; and, in approaching a large underwriter to structure a secondary offering for the advertising of our brand and to increase our budget. KKS also agreed to provide such managerial help and consultation to foster our growth and performance. The KKS Agreement automatically renews with the same terms on the last day of the 12th month, unless either party gives written notice of intent not to renew.

KKS and Knoll were compensated as follows:

· Upon approval of the KKS Agreement, we issued to KKS, one hundred fifty thousand (150,000) shares of our common stock that are “restricted securities” under Rule 144 of the Securities and Exchange Commission (the “SEC”), with “piggy-back” registration rights; and

· 33,750 shares of our common stock through a grant from our Stock Option Plan to Knoll, personally, under a separate Letter Agreement of even date; and

· After successful completion of a minimum of an initial $500,000 financing has been realized by us, we will pay KKS Twenty Thousand Dollars ($20,000) per month so long as we can afford to pay that sum while the KKS Agreement or any extension thereof is in effect.

On November 21, 2007, we executed a Management Consulting Agreement for a 24 month term with LKB Partners, LLC (“LKB”), whereby LKB was engaged to provide additional management consulting services to us. LKB had previously executed a Consulting Agreement with us on April 4, 2007.

LKB and its principal, Frank Marra, agreed to make themselves available to act in the full capacity as General Manager (Marra, individually) and President (Marra, individually) for us, which includes running all day to day business operations, entering into or negotiating contracts, hiring and firing of personnel, paying expenses, devising, revising and implementing business, financing, marketing strategies and all other necessary tasks relevant to the position. Furthermore, KKS will be responsible for providing contacts for us to raise the requisite equity capital to pay our current

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obligations and work to provide capital for our future endeavors. LKB will be paid $8,000 for each month of the 24 month term for these services.

We also agreed to pay LKB for these services 150,000 shares of our common stock that are “restricted securities,” of which 25,000 shares went to Marra personally under a separate Letter Agreement. We also agreed to grant to LKB the option to purchase up to 9.5 percent of the issued and outstanding shares of our common stock at a price of $1.20 per share for a period of two years; provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 through the efforts of LKB or its associates or affiliates or by persons introduced by it or its associates or affiliates by March 31, 2008, with no proration of options in the event all $500,000 is not raised.

Effective during the quarter ended September 30, 2007, but approved by the Board of Directors on November 21, 2007, we executed a Stock Purchase Agreement with Terra Silex Holdings LLC, a Pennsylvania LLC (“Terra Silex”), wherebyTerra Silex purchased one hundred thousand (100,000) shares of our common stock for a purchase price of One Hundred Thousand Dollars ($100,000). This $100,000 amount counts against the $500,000 required to be raised as a condition of the LKB option referenced in the preceding paragraph.

Pursuant to a consulting agreement dated April 4, 2007, between us and LKB, LKB received 200,000 shares of our common stock that are “restricted securities,” and was granted an option to purchase an additional 250,000 shares of our common stock that are “restricted securities” at a price of $1.20 per share for a period of two years ending April 3, 2009. On April 4, 2007, the Company also issued 50,000 shares to Frank Marra.

On November 20, 2007, Dr. Thomas C. Drees, our current President, executed an Option Agreement with LKB pursuant to which he granted LKB an option to purchase 500,000 shares of our common stock that are owned by him at a purchase price of $0.70 per share for a term of five (5) years, provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 through the efforts of LKB or its associates or affiliates or by persons introduced by LKB or its associates or affiliates by March 31, 2008. The $100,000 invested by Terra Silex that is outlined above is considered to be a part of this $500,000 funding condition.

Also, on November 20, 2007, Dr. Drees executed an additional Option Agreement with Terra Silex pursuant to which he granted Terra Silex an option to purchase 500,000 shares of our common stock that are owned by him at a purchase price of $0.70 per share for a term of five (5) years, provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 by March 31, 2008, as outlined above. The $100,000 invested by Terra Silex that is outlined above is also considered to be a part of this $500,000 funding condition.

On November 21, 2007, we executed a Management Consulting Agreement for a term in perpetuity with Thomas C. Drees, PhD., our current President, whereby Dr. Drees was engaged to provide management consulting services. Dr. Drees has agreed to be retained to act in the full capacity as Chief Executive Officer for us, which includes, but not be limited to, working with management to help promote our overall growth, evaluating business opportunities, offering input on critical business issues that may arise from time to time, participate in planning for our business future and other like duties. Dr. Drees will be paid $4,000 for each month, in perpetuity for these services, as long as we are in business or until Dr. Drees’ death. In the event that Dr. Drees is relieved of the obligations of the Drees Agreement and no longer serves as CEO, the fee will remain intact until one of the aforementioned conditions occurs. Notwithstanding that the term shall not have been completed, we may terminate the Drees Agreement (i) upon the death of Dr. Drees, and (ii) if Dr. Drees should be incapacitated by illness or any other matter from performing his duties hereunder for a continuous period of sixty days.

Developments Information for 2008

In the first quarter of 2008, we raised $280,000 from two investors. These funds will be used to further the development of our product and hire additional consultants to assist in our business development. The Company also retained an investor relation firm which will be paid $20,000 and up to 25,000 shares of our common stock. The term of the agreement is for one year.

Developments Information for 2009

In 2009, we focused on defining how our product could be used in combination with other companies’ products to bring it to a commercial state. We also focused on how to pursue patent applications of our products.

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Business.

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

WeThrough ~~have completed~~ the ~~compounding~~operations of ~~PHER-O2~~our subsidiary, ~~and~~SGN LifeSciences we ~~have~~are ~~completed~~dedicated ~~initial~~to ~~gross~~discovering, ~~animal~~developing ~~tests~~and ~~that~~commercializing donovel ~~not~~biotechnologies ~~require~~that ~~regulatory~~demonstrate ~~approval~~significant ~~prior~~potential tofor ~~commencement~~medical breakthroughs. ~~However,~~The ~~regulatory~~company ~~agencies~~is ~~may~~keenly ~~review~~focused on the ~~data~~development ~~gathered~~and ~~from~~commercialization ~~any~~ of ~~these~~perfluorocarbon ~~tests~~based therapeutic oxygen carriers. We ~~have~~Its ~~manufactured~~lead product, PHER-02, is an intravenous perfluorocarbon emulsion that is highly efficient at dissolving and delivering oxygen to the ~~experimental~~tissues. ~~doses~~We ofbelieve that such properties will make PHER-O202 ~~required~~an toideal ~~conduct~~product ~~these~~for ~~tests~~the treatment of a myriad of medical conditions with high morbidity and/or mortality directly resulting from a lack of oxygen at the cellular level. Our ~~current~~philosophy ~~second~~is ~~phase~~to develop products that have a sound scientific basis, a demonstrated proof of ~~development~~concept and adhere to the highest industry standards of ~~PHER-02~~product ~~involves:~~development.

* We have completed the ~~completion~~compounding of aPHER-O2, ~~Master~~and ~~Drug~~we ~~File~~have completed initial gross animal tests that do not require regulatory approval prior to commencement. However, ~~pending~~regulatory ~~final~~agencies ~~funding~~may review the data gathered from any of these tests. We have also manufactured the experimental doses of PHER-O2 required to conduct these tests. We intend to continue developing the perfluorocarbon compounds in PHER-O2 in order to optimize its quality for intravenous use; and begin animal safety and efficacy trials in accordance with FDA guidelines and comparable foreign regulatory requirements, with the aid and assistance of a regulatory specialist. We will need additional funding for these purposes.

* We intend to continue working with outside agencies and/or universities to support the writing and completion of apeer ~~“method~~reviewed ofmedical ~~use”~~papers. These papers will be announced as agreements with the agencies and/or universities are completed. The Company has been contacted related to ~~support~~many ~~labeling~~uses of PHER-O2. Notwithstanding internal Company identified programs, Sanguine is desirous of moving toward licensing opportunities. To complete licensing opportunities, it will be necessary for third parties to complete necessary testing and peer reviewed studies. Should the ~~product;~~testing and studies prove successful, the Company intends to move toward revenue generation. All revenue considerations will comply with all necessary FDA requirements.

* the completion of a 510 (k) submission to the FDA to request support for PHER-O2 as a device;

* the completion formulation adjustments as deemed necessary for PHER-O2’s use as a transport medium;

In parallel with our second phase of operations, we intend to continue working with outside agencies and/or universities to support the writing and completion of peer reviewed medical papers. These papers will be announced as agreements with the agencies and/or universities are completed. The Company has been contacted related to many uses of PHER-O2. Notwithstanding internal Company identified programs, Sanguine is desirous of moving toward licensing opportunities. To complete licensing opportunities, it will be necessary for third parties to complete necessary testing and peer reviewed studies. Should the testing and studies prove successful, the Company intends to move toward revenue generation. All revenue considerations will comply with all necessary FDA requirements.

In our third phase of operations, we intend to continue developing the perfluorocarbon compounds in PHER-O2 in order to optimize its quality for intravenous use; and begin animal safety and efficacy trials in accordance with FDA guidelines and comparable foreign regulatory requirements, with the aid and assistance of a regulatory specialist. We will need additional funding for these purposes.

In our final phase, we intend to:

* complete United States testing of PHER-O2;

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

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

InPHER-O2 ~~our~~has ~~final~~not ~~phase,~~submitted weany ~~also~~application ~~intend~~ to ~~continue~~any ~~trials~~federal, tostate ~~test~~or ~~PHER-O2~~foreign ~~for~~agency ~~other~~to ~~applications,~~seek ~~transplant~~authority ~~organ~~for ~~preservation~~animal ~~and~~or ~~treatment~~human oftesting. The ~~carbon~~development ~~monoxide~~process ~~poisoning,~~will ~~sickle~~be ~~cell~~time ~~anemia,~~consuming ~~heart~~and ~~attack~~expensive. It ~~and~~will ~~stroke~~also ~~and~~be ~~numerous~~subject ~~other~~to ~~confidential~~extreme ~~areas~~governmental regulation. We will have to ~~conduct~~prove ~~similar~~that ~~rigorous~~our ~~testing~~product is safe and ~~clinical~~efficacious ~~trials~~for ofhuman ~~PHER-O2~~use. Until then, we will have no potential for ~~each~~revenues ~~desired~~from ~~application,~~operations ~~although~~except wefor ~~expect~~licensing. We ~~much~~cannot ofassure ~~all~~you ~~sales~~that we will be ~~off~~able to raise the money necessary to develop PHER-~~label~~O2 or that, asif ~~was~~we ~~the~~raise ~~case~~sufficient ~~with~~funds, ~~the~~that ~~first~~we ~~generation~~will ~~sales~~ever ofreceive ~~Fluosol~~the necessary federal, astate ~~first~~or ~~generation~~foreign ~~product~~agency ofapproval ~~PHER-O2~~to manufacture or market the product.

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

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necessary to develop PHER-O2 or that, if we raise sufficient funds, that we will ever receive the necessary federal, state or foreign agency approval to manufacture or market the product.

Principal Products or Services and their Markets.

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

~~We believe that PHER~~-~~O2 has the following advantages over human blood:~~3-

* maythat ~~carry~~is ~~three~~harmless to ~~four~~humans ~~times~~and the atmosphere and was used in the FDA approved first generation product, Fluosol, purified water and a proprietary surfactant to hold the emulsion together. Perfluoro-decalin gives our product its oxygen carrying ability. The surfactant is non-toxic and was FDA approved in Fluosol™ and, being fluorinated, helps increase PHER-O2's oxygen carrying capacity and emulsion stability. PHER- 02 can be mass-produced and be stored at room temperature for up to three and one half years. We believe that the unique chemical nature of ~~human~~PHER-O2 ~~blood~~will ~~per~~make ~~unit~~it ~~volume;~~ideal for many medical applications, although each application will be subject to the same types of rigorous testing, clinical trials and governmental regulatory approval process.

* freePHER-O2 ofis ~~HIV,~~a ~~hepatitis~~second Bgeneration &improved Cdrug from Fluosol-DA™, ~~Mad~~the ~~Cow~~only ~~and~~synthetic ~~other~~red blood~~-borne~~ ~~disease;~~cell approved by the FDA. This approval was completed under the management of our CEO and Chairman, Thomas Drees, Ph.D.

* universalWe ~~match~~believe that its unique qualities may make PHER-O2 ideal for ~~all~~numerous ~~blood~~medical ~~types;~~indications, including:

* may be mass-produced;

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

* may be stored at room temperature;

* has controllable circulatory half-life; and

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

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

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

* transportation of pancreas islets for treatment of diabetes;

* ophthalmic retinal surgery;

* angioplasty;

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

* Alzheimer's Disease;

* traumatic brain injury;

* oxygenation of cancerous tumors;

* nuclear magnetic resonance imaging;

* CAT scans;

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

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

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

For Ophthalmic retinal surgery, we are evaluating a new version of PHER-6-02 for surgical use. This product is believed to have characteristics that can be used for retinal surgery because of its specific weight properties.

~~For~~PHER-O2's ~~Ophthalmic~~anticipated ~~retinal~~ability ~~surgery,~~to wecarry ~~are~~oxygen ~~evaluating~~makes ait ~~new~~promising ~~version~~for ofmany ~~PHER-02~~medical ~~for~~applications ~~surgical~~in ~~use~~which increased oxygenation is vital. ~~This~~PHER-O2 ~~product~~molecules isare ~~believed~~up to ~~have~~25 ~~characteristics~~times smaller than human red blood cells leading our management to believe that ~~can~~PHER-O2 could be ~~used~~particularly useful for ~~retinal~~oxygenating ~~surgery~~organs ~~because~~through ofblocked ~~its~~arteries, ~~specific~~which ~~weight~~are ~~properties. The~~the ~~new~~primary ~~product~~cause ~~will~~of beheart ~~transparent~~attack and stroke.

~~Blood~~One ~~transfusion~~of ~~represents~~our aformer ~~vast~~competitors ~~market~~had ~~for~~obtained ~~synthetic~~FDA ~~red~~approval ~~blood~~in ~~cells. The~~1989, ~~limited~~under ~~supply~~the guidance of ~~safe~~Dr. ~~donated~~Thomas ~~blood~~Drees isour ~~the~~Chairman ~~largest~~and ~~constraint~~CEO. onThat product was approved for use in angioplasty, the ~~number~~treatment of ~~transfusions~~blocked ~~given~~arteries ~~annually. If~~with asmall ~~safe~~inflated ~~blood~~balloons. This ~~substitute~~application ~~were~~involves ~~widely~~the ~~available,~~injection ~~more~~of ~~transfusions~~the ~~could~~perfluorocarbon beemulsion ~~given~~into tothe ~~those~~artery ~~who~~past ~~desperately~~the ~~need~~inflated ~~them~~balloon. ~~The~~As ~~present~~a ~~market~~result, ~~for~~the ~~transfusions~~heart ~~worldwide~~receives ismore ~~100~~oxygen,~~000,000~~ ~~units~~the ~~per~~treating ~~year,~~physician ~~but~~can ~~that~~keep isthe ~~only~~balloon ~~one-third~~inflated oflonger and the ~~annual~~angioplasty ~~demand.~~is Wemore ~~hope~~effective tothan ~~fulfill~~it ~~this~~would ~~need~~otherwise ~~with PHER-O2~~be. This ~~The~~competitor ~~key~~later ~~ingredients~~announced inthat ~~PHER-O2~~it ~~are~~would ~~readily~~no ~~available~~longer inmanufacture ~~the~~its ~~United~~product, ~~States~~leaving ~~from~~us ~~many~~well ~~manufacturers.~~positioned ~~When~~in ~~combined,~~this ~~using~~market ~~our~~segment. Fluosol ~~proprietary~~was ~~emulsion process~~non-stable, weso ~~know~~it ~~that~~had ~~the~~to ~~result~~be ~~will~~frozen, bewhich amade ~~plentiful~~it ~~alternative~~difficult to ~~donated human blood~~handle.

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

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

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

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

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

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

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

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

Distribution Methods of the Products or Services.

None; our products are still in the research and development stage.

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Status of any Publicly Announced New Product or Service.

None; not applicable.

Competitive Business Conditions and the Small Business Issuer's Competitive Position in the Industry and Methods of Competition.

10We ~~years~~believe ~~ago,~~ there ~~were~~are 15potentially ~~possible~~many ~~competitors~~drug and pharmaceutical companies working on similar products. We ~~believe~~have ~~there~~identified ~~are still~~ three companies, that we know about, working to develop ~~alternatives~~perfluorocarbon tobased ~~human blood~~therapeutics. They include:

* ~~Biopure~~Alliance ~~Corporation~~Pharmaceuticals, ofSan ~~Cambridge~~Diego, ~~Massachusetts~~California;

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

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

~~Each of these competitors files reports with the Securities and Exchange Commission, and these reports are available for review in the Securities and Exchange Commission's EDGAR Archives.~~ These competitors are involved in the development of a wide variety ofperfluorocarbon ~~human~~based ~~blood substitutes, including synthetic compounds, recycled outdated human blood and bovine hemoglobin~~therapeutics. ~~Neither~~This ~~the~~ list of competitors ~~nor the list of human blood substitutes~~ is not exhaustive. Furthermore, some of our existing or potential competitors have significantly greater technical and financial resources than we do and may be better able to develop, test, produce and market products. These competitors may develop products that are competitive with or better than our product and that may render our product obsolete. We can provide no assurance that we will be able to compete successfully.

Sources and Availability of Raw Materials and Names of Principal Suppliers.

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

Dependence on One or a Few Major Customers.

~~None;~~We had only one customer in 2010 and given the nature of our products, would not ~~applicable~~anticipate more than a limited number of customers.

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

Currently, we do not have any patents on our products. Our prior patents have either expired or not been renewed. We are in the process of resubmitting patent applications on our products and process but the ultimate success of ~~these applications are unknown.~~

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these applications are unknown.

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

Need for any Governmental Approval of Principal Products or Services.

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

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

Effect of Existing or Probable Governmental Regulations on the Business.

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

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

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

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

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

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the criteria for regulatory approval, require additional testing or information or require post-marketing testing and surveillance to monitor the safety of the product if it does not believe that the applications contains adequate evidence of the safety and efficacy of the drug. Despite the submission of this data, the FDA may ultimately decide that the application does not satisfy its regulatory criteria for approval. The testing and approval process is likely to require substantial time and effort. We cannot guarantee that approval will be granted for our product or our proposed facilities on a timely basis, if at all.

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

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Research and Development Costs During the Last Two Fiscal Years.

Since inception, we have expended a total of approximately $1,973,158 on research and development. During years ended December 31, ~~2009~~2010, and ~~2008~~2009, we had no research and development expense.

Cost and Effects of Compliance with Environmental Laws.

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

Number of Total Employees and Number of Full Time Employees.

We presently have two employees, our ~~Chairman, President and~~ CEO, Thomas C. Drees, ~~Ph.D.;~~ and our ~~Chief Financial Officer~~President, ~~David~~Frank EMara. ~~Nelson.~~ ~~Dr.~~As ~~Drees~~our isproduct ~~employed~~advances ~~full~~and ~~time. If~~ we are able to ~~commence~~start ~~initial~~obtaining ~~FDA~~additional ~~approved~~contracts ~~animal~~for ~~testing~~the ~~and~~use ~~manufacturing~~ of ~~this~~our ~~product~~products ~~for~~in ~~these tests~~laboratories, we will ~~need~~start ~~additional~~expanding ~~employees~~our employee base. WeAt ~~are~~this ~~presently~~time ~~unable~~we todo ~~estimate~~not know the ~~exact~~timing ~~number~~ of ~~employees~~the ~~that~~hiring weof ~~may~~any ~~need~~additional ~~for these services~~employees.

Reports to Security Holders.

You may read and copy any materials that we file with the Securities and Exchange Commission at the Securities and Exchange Commission's public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports that we have filed electronically with the Securities and Exchange Commission at their Internet site www.sec.gov.

ITEM 2. PROPERTIES

We lease ~~approximately~~office ~~600~~space ~~square~~in ~~feet~~Roswell, ofGeorgia ~~office~~for ~~space~~$900 ~~located~~per atmonth. The ~~101~~lease ~~East~~is ~~Green~~on ~~Street,~~a ~~Suite~~month 6,to month basis. We previously leased space in Pasadena California,. The ~~91105,~~lease was to run through October 2011 at a ~~base~~monthly rent of $~~8,610 per month~~861. ~~The~~We ~~lease~~are ~~expires~~trying into ~~October~~negotiate ~~2010~~with the landlord on a final payment on this property.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. (Reserved and Removed)

PART II

Our common stock ~~commenced~~trades ~~to trade~~ on the "“OTC Bulletin Board"” ofunder the ~~National~~symbol ~~Association~~under ofthe ~~Securities~~symbol ~~Dealers, Inc~~“SGUI.” The ~~("NASD")~~range inof ~~the~~high ~~second~~and ~~quarter~~low ofbid ~~1994~~quotations ~~under~~for ~~the~~our ~~symbol~~common ~~“SGNC,”~~stock ~~and~~during ~~after~~each ~~September~~quarter ~~10,~~of ~~2008~~the ~~under~~years ~~the~~ended ~~symbol~~December ~~“SGUI.”~~31, 2010, 2009

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~~The range of high~~ and ~~low bid quotations for our common stock during each quarter of the years ended December 31, 2007,~~ 2008 ~~and 2009~~, is presented below. Prices are inter-dealer quotations as reported do not necessarily reflect transactions, retail markups, mark downs or commissions. On March 31, 2011, the bid and ask for our shares was $0.15 and 0.34. The prices prior to September 10, 2008, do not reflect the 1 for 20 reverse stock split.

STOCK QUOTATIONS*

Quarter ended:

High

Low

March 31, 2007

$.15

$.085

June 30, 2007

$.175

$.096

September 30, 2007

$.12

$.081

December 31, 2008

$.12

$.055

March 31, 2008

$.11

$.07

June 30, 2008

$.10

$.07

September 30, 2008**

$1.15

$.04

December 31, ~~2008~~2009**

$.75

$.17

March 31, 2009**

$.22

$.12

June 30, 2009**

$.25

$.11

September 30, 2009**

$.24

$.10

December 31, 2009**

$.25

$.14

March 31, 2010

$.35

$.17

June 30, 2010

$.51

$.19

September 30, 2010

$.42

$.25

December 31, 2010

$.44

$.25

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

** In 2008, we completed a 1 for 20 reverse stock split. Prices beginning with those at September 30, 2008, reflect the 1 for 20 reverse stock split. All references to shares of common stock have been retroactively restated.

Holders.

The number of record holders of our common stock as of March 2631, ~~2010~~2011, was approximately ~~562~~566.

Dividends.

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

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Securities Authorized for Issuance under Equity Compensation Plans.

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
	(a)	(b)	(c)
Equity compensation plans approved by security holders	03,000,000	$0.20	03,000,000
Equity compensation plans not approved by security holders	0	0	0
Total	03,000,000	$0.20	03,000,000

Recent Sales of Unregistered Securities.

Restricted Securities.

~~The~~During ~~following~~2008 "and 2009, we issued shares to our board of directors and to our medical advisory board for services. All of the shares issued were “restricted” and we believe exempt from registration. We issued all of these securities" to persons who were either “accredited investors,” or “sophisticated investors” who, by reason of education, business acumen, experience or other factors, were fully capable of evaluating the risks and merits of an investment in our ~~Company~~company; and each had prior access to all material information about us. We believe that the offer and sale of these securities were ~~sold~~exempt ~~during~~from the ~~past~~registration ~~three~~requirements ~~calendar~~of ~~years:~~the Securities Act, pursuant to Sections 4(2) and 4(6) thereof, and Rule 506 of Regulation D of the Securities and Exchange Commission and from various similar state exemptions.

Name	Number of Shares or Units	Date	Consideration
Thomas C. Drees	1,875	1/2007	Services
David E. Nelson	1,875	1/2007	Services
Edward L. Kunkel	1,875	1/2007	Services
Medical Advisory Board	5,625	1/2007	Services
Robert Kwun	1,875	1/2007	Services
James Shapiro	7,500	1/2007	Services
Private Placement	37,333	3/8/07	$1.20 per share
LKB Partners, LLC	200,000	4/4/2007	Services
KKS Venture Management, Inc.	150,000	11/21/2007	Services
LKB Partners, LLC	12,500	11/21/2007	Services
Terra Silex Holdings, LLC	100,000	11/21/2007	$100,000
Thomas C. Drees	2,500	4/2008	Services
David E. Nelson	2,500	4/2008	Services
Edward L. Kunkel	2,500	4/2008	Services
Medical Advisory Board	5,625	4/2008	Services
Thomas C. Drees	2,500	5/2009	Services
David E. Nelson	2,500	5/2009	Services
Edward L. Kunkel	2,500	5/2009	Services
Medical Advisory Board	10,000	5/2009	Services

During the year ended December 31, 2009 the Company received three subscriptions to purchase a total of 25,000 shares of preferred stock at $1 per share for total proceeds of $25,000. The shares were subsequently issued in 2010.

WeDuring ~~issued~~2009, ~~all~~the ofCompany ~~these~~issued ~~securities to persons who were either "accredited investors~~1,"000,000 orshares ~~"sophisticated~~to ~~investors"~~LKB ~~who~~Partners, byLLC ~~reason~~for ofconsulting ~~education~~services. Additionally, ~~business~~the ~~acumen,~~Company ~~experience~~agreed orto ~~other~~issue ~~factors,~~up ~~were~~to ~~fully~~9.5 ~~capable~~percent of ~~evaluating~~ the ~~risks~~Company’s ~~and~~outstanding ~~merits~~shares of ancommon ~~investment~~stock inat ~~our~~a ~~company;~~price ~~and~~of ~~each~~$0.10 ~~had~~per ~~prior~~share ~~access~~under tothe ~~all~~terms ~~material~~of ~~information~~a ~~about~~stock usoption. WeThe ~~believe~~option ~~that~~would ~~the~~expire ~~offer~~on ~~and~~December ~~sale~~31, of2013. LKB ~~these~~would ~~securities~~also ~~were~~receive ~~exempt~~a ~~from~~monthly ~~the~~fee ~~registration requirements~~ of ~~the~~$8,000 ~~Securities Act~~when, ~~pursuant~~and toif, ~~Sections~~the ~~4(2)~~Company ~~and~~had ~~4(6)~~such ~~thereof,~~funds ~~and~~available ~~Rule~~to ~~506~~pay ofto ~~Regulation~~LKB. The Dterm of the ~~Securities~~consulting ~~and~~agreement ~~Exchange~~is ~~Commission~~twenty-four ~~and from various similar state exemptions~~months.

During 2009, the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services. Additionally, the

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Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option. The option would expire on December 31, 2013. LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB. The term of the consulting agreement is twenty-four months.

The Company also entered into a consulting agreement with Gary Corderman. Under the terms of the agreement, Mr. Corderman received 500,000 shares of the Company’s common stock along with a monthly consulting fee of $4,000 if the Company has the funds to pay. If the Company does not have the funds to pay Mr. Corderman, he will receive the $4,000 in shares of the Company. The term of the agreement is for twelve months. The Company also issued 17,500 shares for services in 2009. All issuance were believed exempt from registration under Section 4(2) of the Securities Act of 1933.

In 2010, we received subscriptions to purchase a total of 133,500 shares of preferred stock at $1 per share for total proceeds of $133,500. As of December 31, 2010, 125,000 of these shares had been issued. We issued all of these securities to persons who were either “accredited investors,” or “sophisticated investors” who, by reason of education, business acumen, experience or other factors, were fully capable of evaluating the risks and merits of an investment in our company; and each had prior access to all material information about us. We believe that the offer and sale of these securities were exempt from the registration requirements of the Securities Act, pursuant to Sections 4(2) and 4(6) thereof and from various similar state exemptions.

Use of Proceeds of Registered Securities.

Proceeds from the sale of registered securities received during the year ended December 31, 2006, totaled $95,410, from warrant exercises. These funds were primarily used for professional services and administrative expenses. There were no sales of registered securities during ~~2008~~2009 or ~~2009~~2010.

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Purchases of Equity Securities by Us and Affiliated Purchasers.

There were no purchases of our equity securities by us or any affiliated purchasers during the calendar year ended December 31, ~~2009~~2010.

ITEM 6. SELECTED FINANCIAL DATA

Summary of Financial Information

We had no revenues in ~~2008~~2010 orof ~~2009~~$32,970. We had a net loss of $~~388~~333,~~622~~003 for the year ended December 31, ~~2009~~2010. At December 31, ~~2009~~2010, we had cash of $1,~~928~~195. We had a negative working capital of $~~309~~435,~~466, which, if prepaid expenses are taken into account would increase to $477,167~~944.

The following table shows selected summarized financial data for the Company at the dates and for the periods indicated. The data should be read in conjunction with the financial statements and notes included herein beginning on page F-1.

STATEMENT OF OPERATIONS DATA:

	For the Year Ended December 31, 2009	For the Year Ended December 31, 2008
	For the Year Ended December 31, 2010	For the Year Ended December 31, 2009
Revenues	$ -32,970	$ -
Selling, General and Administrative Expenses	3558,~~851~~688	8235,~~408~~851
Net Loss	~~388~~(333,~~622~~003)	1(388,~~135,444~~622)
Basic Income (Loss) per Share	(0.0605)	(0.2206)
Diluted Income (Loss) per Share	(0.0605)	(0.2206)
Weighted Average Number of Shares Outstanding	6,~~070~~682,~~914~~072	56,~~089~~070,~~200~~914
Weighted Average Number of Fully Diluted Shares Outstanding	6,~~070~~682,~~914~~072	56,~~089~~070,~~200~~914
BALANCE SHEET DATA:
	December 31, 2009	December 31, 2008
	December 31, 2010	December 31, 2009
Total Current Assets	$ ~~169~~29,~~629~~195	$ ~~112~~169,~~534~~629
Total Assets	~~226~~29,~~332~~658	~~113~~226,~~728~~332
Total Current Liabilities	~~479~~465,~~095~~139	~~374~~479,~~631~~095
Working Capital	(309,466)	(262,097)
Working Capital (Deficit)	(435,944)	(309,466)
Stockholders’ Equity (Deficit)	(~~252~~435,~~763~~481)	(~~260~~252,~~903~~763)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Plan of Operation.

General.

We have not commenced planned principal operations, but have made progress, in formulation and stability testing.

In January, 2005, we were successful in developing improved formulations of our surfactants for PHER-02.

In December, 2006, we completed a pre-IND meeting with the FDA, where Company management presented data to determine an appropriate regulatory path related to PHER-O2.

Pending additional funding our plan of operation for the next 12 months is to complete the preparation and submission of the U.S. FDA New Device Application to support PHER-02 as a synthetic oxygen carrying product.

Our proposed plan of operation is composed of "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 three-six months): Complete the development of perfluoro-decalin and the synthetic surfactants that make up PHER-O2, manufactured experimental doses in accordance with FDA and overseas regulations and submit data to support a Master Drug Filing. Estimated cost is not to exceed $500,000, divided as follows: Completed surfactant formulation (done) and the manufacture of sufficient product for testing, (on going); animal safety and efficacy trials through a sub-contractor, (done); and administrative, patent and proprietary right protection and marketing costs,(in process) Optimize stabilized product to support the Master Drug Filing (in ~~process).~~

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process).

Stage B (approximately three-six months): In the second period, we will produce optimal quantities and conduct testing 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 contractors and/or employees.

Stage C (approximately three-six months): In the third period, we intend to prepare new 510(k) device application with the FDA. Estimated cost is $1,000,000, to be used as follows: set-up pilot facility, or subcontractor, to manufacture small quantities of PHER-O2 for use in testing and in connection with the New Drug Applications [done], prepare and submit data for use of PHER-O2 as a whole organ transportation medium in support of FDA labeling, and administrative, patent and proprietary right protection and marketing costs, (in process).

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.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the years ended December 31, ~~2009~~2010 and ~~2008~~2009, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010.

The Company’s accounting policies are more fully described in Note 1 of the audited financial statements. As discussed in Note 1, the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the future events that affect the amounts reported in the financial statements and the accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual differences could differ from these estimates under different assumptions or conditions. The Company believes that the following addresses the Company’s most critical accounting policies.

Revenue Recognition

We recognize revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). Under SAB 104, revenue is recognized at the point of passage to the customer of title and risk of loss, when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts is maintained to provide for losses arising from customers’ inability to make required payments. If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required.

Income Taxes

We account for income taxes in accordance with FASC 740-20, “Accounting for Income Taxes”. Under FASC 740-20, deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

We had no revenues for the calendar years ending December 31, ~~2009~~2010, of $32,970 and ~~2008~~no revenues in 2009. Our 2010 revenues were from the sale of our products to a lab. We had no material operations, except ~~the~~analyzing ~~research~~our ~~and~~product ~~development~~market ~~activities~~and ~~related~~attempting to ~~our~~start ~~subcontracted~~finding ~~research~~labs ~~and~~interested ~~development~~in of our ~~product,~~ PHER-O2.

~~-14-~~We realized a net loss of $333,003 for the year ended December 31, 2010, and a net loss of $388,622 for the year

We realized a net loss of $388,622 for the year ended December 31, 2009, and a net loss of $1,135,444 for the year ended December 31, 2008. Most of our expense related to the value of equity securities issued by us for services rendered.-11-

Weended ~~had~~December no31, ~~research~~2009. Most ~~and~~of ~~development~~our ~~expenses~~expense inrelated ~~2008~~to orthe ~~2009~~value of equity securities issued by us for services rendered.

We had no research and development expenses in 2010 or 2009.

Liquidity.

As of December 31, ~~2009~~2010, we had $1,~~928~~195 in cash, with $~~479~~465,~~095~~139 in current liabilities. We have had to rely on our management to fund operations through loans to the Company and limited stock sales.

During the calendar year ended December 31, ~~2009~~2010, we had operating expenses of $~~379~~420,~~808~~997, and no revenues of only $32,970. We had operating expenses of $1379,~~145,825~~808 during the calendar year ended December 31, ~~2008~~2009. Most of these expenses related to the value of equity securities issued by us for services rendered.

Cash resources at December 31, ~~2009~~2010, and ~~2008~~2009, were $1,~~928~~195 and $1,~~159~~928, respectively. At this time without additional capital infusions, it will be difficult for the Company to remain in business. Our auditors have issued a going concern qualification as to our ability to stay in business. We currently do not have the resources to engage in any further development of our products and cannot cover ongoing expenses. We are actively searching for industry partners to help offset further development costs. However, even with industry partners, we must raise additional capital if we are to remain viable.

Off Balance Sheet Arrangements.

We had no off balance sheet arrangements during the year ended December 31, ~~2009~~2010.

Forward Looking Statements.

Statements made in this Form 10-K 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~~perfluorocarbon ~~synthetic~~based ~~blood~~therapeutic ~~industry~~products, 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~~perfluorocarbon ~~blood~~based therapeutic products 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~~perfluorocarbon ~~blood~~based therapeutic products industry, the development of products and that may be superior to the products and services offered by us, demand for ~~synthetic~~perfluorocarbon ~~blood~~based therapeutic 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company are set forth immediately following the signature page to this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The Company has had no disagreements with its certified public accountants with respect to accounting practices or procedures or financial disclosure.

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ITEM 9A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our ~~President~~Chief Executive Officer and ~~CFO~~Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our ~~President~~Chief Executive Officer and ~~CFO~~Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our ~~President~~Chief Executive Officer and ~~CFO~~Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management, with the participation of the ~~President~~Chief Executive Officer and ~~CFO~~Principal Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, ~~2009~~2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework. Based on this evaluation, our management, with the participation of the ~~President~~Chief Executive Officer and ~~CFO~~Principal Financial Officer, concluded that, as of December 31, ~~2009~~2010, our internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Security and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in internal control over financial reporting

There have been no changes in internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identification of Directors and Executive Officers.

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

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Directors and Executive Officers.

Name	Positions Held or Designation	Date of Election or Resignation	Date of Termination
Thomas C. Drees, PhD., MBA	CEO, President, Director Chairman	6/93 1/98 6/93 11/95	* * * *
Frank Marra	CEO, President, Director	February 2011	* * * *
David E. Nelson, CPA	Director Chief Financial Officer Secretary/Treasurer	3/96 3/96 6/03	* * *
Thomas C. Drees, PhD., MBA	Director	11/95	*
Edward L. Kunkel, Esq.	Director	4/94	*

* These persons presently serve in the capacities indicated.

Term of Office.

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

Medical Advisory and Applications Board of Directors.

Name	Positions Held	Date of Election or Designation	Date of Termination or Resignation
Craig Morrison, M.D.	Member	10/00	*
Leon Cass Terry, M.D., Ph.D.	Member	10/00	*
Herbert J. Meiselman, Sc.D.	Member	10/00	*
Robert Kwun, M.D.	Member	12/04	*

* These persons presently serve in the capacities indicated.

Business Experience.

~~Thomas C~~Mr. ~~Drees~~Marra, ~~Ph.D.,~~age ~~MBA~~47, ~~Chairman,~~is ~~President,~~currently ~~CEO~~the ~~and~~managing amember ~~Director.~~of ~~Dr.~~LKB ~~Drees~~Partners, ~~age~~LLC ~~80,~~which isengages ~~the~~in ~~founder~~financial ofconsulting ~~Sanguine~~and ~~California. Dr.~~acts ~~Drees~~as ~~was~~a ~~Vice~~private ~~President~~investment ~~and~~firm ~~General~~for ~~Manager~~small ofcompanies. Prior ~~Abbott~~to ~~Scientific~~founding ~~Products~~LKB ~~Division,~~in ~~collector~~November of2006, ~~blood~~Mr. ~~plasma~~Marra ~~derivatives~~ran ~~and~~Stonebridge ~~manufacturer~~Ross ofwhich ~~human~~he ~~blood~~founded ~~derivatives~~in ~~from~~1992 ~~1973~~and tosold ~~1978~~in 2003. ~~From~~Mr. ~~1978~~Marra toalso ~~1984,~~worked heas ~~was~~a ~~the~~registered ~~President~~representative ~~and~~for ~~CEO~~Drexel ofBurnham ~~Alpha~~after ~~Therapeutics~~attending ~~Corporation,~~college aat ~~subsidiary~~the University of ~~Green~~West ~~Cross~~Virginia. Mr. ~~Corporation~~Marra ofhas ~~Japan~~focused ~~and~~on ~~the~~work ~~developer~~with ofpublic ~~Fluosol~~and DAprivate ~~20,~~emerging ~~the~~growth ~~only~~companies. ~~FDA-approved~~As ~~synthetic~~part ~~blood~~of ~~product~~Mr. ~~For~~ 33Marra’s ~~years~~consulting work, ~~Dr.~~he ~~Drees~~ has ~~been~~acted ~~involved~~as atinterim ~~top~~CEO ~~management~~for ~~levels~~three ~~with~~public ~~the~~companies ~~collection,~~Sun ~~manufacture~~Cut ~~and~~Floral ~~marketing~~Distributors offrom ~~human~~1999 ~~blood~~to ~~plasma~~2001, ~~derivatives. He~~a ~~has~~consolidator ~~written~~of ~~many~~national ~~publications~~floral ondistributors, ~~the~~Interactive ~~subject,~~Medical ~~including~~Technologies ~~the~~from ~~widely-acclaimed~~1993 ~~book~~to ~~"Blood~~1995, ~~Plasma:~~a ~~The~~biomedical ~~Promise~~technology company and ~~the Politics~~Rheologics," ~~Ashley~~Inc. ~~Books,~~from ~~New~~2005 ~~York,~~to ~~1983~~2007 which developed a whole blood viscometer.

~~David~~Thomas EC. ~~Nelson~~Drees, ~~CPA~~Ph.D., ~~Chief~~MBA, ~~Financial~~Chairman, ~~Officer~~ and Director. Mr Dr. ~~Nelson~~Drees, age 6581, ~~received~~is athe Bfounder of Sanguine California.S Dr. ~~degree~~Drees inwas ~~accounting~~Vice ~~from~~President ~~the~~and ~~University~~General Manager of ~~Utah~~Abbott inScientific ~~1966. He~~Products ~~has~~Division, ~~over~~collector 20of ~~years'~~blood ~~experience~~plasma inderivatives ~~operations,~~and ~~finance~~manufacturer ~~and~~of ~~regulatory~~human ~~compliance~~blood ofderivatives ~~stock~~from ~~brokerage~~1973 ~~firms~~to 1978. HeFrom is1978 ~~the~~to ~~past~~1984, he was the President and CEO of ~~Covey~~Alpha &Therapeutics ~~Company~~Corporation, ~~Inc.,~~ a ~~broker/dealer~~subsidiary ~~formerly~~of ~~registered~~Green ~~with~~Cross ~~the~~Corporation ~~Securities~~of Japan and ~~Exchange~~the ~~Commission~~developer of Fluosol DA 20, the only FDA-approved synthetic blood product. MrFor 33 years, Dr. ~~Nelson~~Drees has been ainvolved ~~member~~at oftop management levels with the ~~NASD's~~collection, ~~Board~~manufacture and marketing of ~~Arbitrators~~human blood plasma derivatives. He has written many publications on the subject, including the ~~American~~widely-acclaimed ~~Institute~~book of"Blood ~~Certified~~Plasma: ~~Public~~The ~~Accountants~~Promise and the ~~Utah~~Politics," ~~Association~~Ashley ofBooks, ~~Certified~~New ~~Public~~York, ~~Accountants~~1983.

Edward L. Kunkel, Esq., Director. Mr. Kunkel is 6162 years of age. He graduated with a Juris Doctor degree from the University of Southern California in 1973. From 1973 to 1978, he practiced law with the firm of Karns & Karabian in Los Angeles, California. From 1978 to the present, he has practiced educational law, real estate law and general business law in his own firm. Mr. Kunkel is a member of the State Bar of California, the Los Angeles County Bar Association and the National School Board Attorneys' Association. He has also been a licensed real estate broker since 1979.

Craig Morrison, M.D., Advisory Board Member, is 66 years of age, and practices at the Brigham Young Student Health

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

Leon Cass Terry, M.D., Ph.D., Advisory Board Member, is 67 years of age, and joined the Medical College of Wisconsin as a Professor of Neurology and Professor of Physiology in 1989, until his retirement. Focusing on his professorial duties, Dr. Terry recently stepped down from his position as the Chairman of Neurology, which he held from June of 1989 to May, 2000. During his tenure, Dr. Terry was the Associate Dean for Ambulatory Care from January, 1997 to March, 1998, and was the Chief of Staff from January, 1997 to January, 1999. He also held previous teaching and professional positions as a Research Scientist for the University of Michigan, Institute of Gerontology; Professor of Neurology and Associate Professor of Physiology and Neurology at the University of Michigan; and Associate Professor of Neurology at the University of Tennessee Center for Health Sciences. Dr. Terry earned his Doctorate of Pharmacology from the University of Michigan, his Doctor of Medicine from Marquette University Medical School, his Ph.D. in Experimental Medicine from McGill University Medical School and his Master of Business Administration from the University of South Florida. Dr. Terry has authored over 100 peer-reviewed articles, abstracts and book chapters in well known and respected publications. He was also principal or co-investigator on over 30 grants from the National Institute of Health, various pharmaceutical companies, philanthropic donations and others. He has also conducted clinical trials in various neurological disorders.

Herbert J. Meiselman, Sc.D., Advisory Board Member, is 68 years of age. He is an active Professor and Vice Chairman of the University of Southern California School of Medicine, Department of Physiology and Biophysics. Professor Meiselman graduated from Michigan Technical University with a BS degree in 1962. He received a Sc.D. degree from the Massachusetts Institute of Technology in 1965. As a Research Fellow at the California Institute of Technology, he studied in-vivo microcirculatory blood flow from 1966 to 1968. In 1968, he expanded his research studies to include in-vivo blood rheology, a program jointly administered by the California Institute of Technology and the University of Southern California Medical School. Since 1972, Dr. Meiselman's research at the University of Southern California has been concentrated in the areas of blood rheology and the physical behavior of red blood cells and white blood cells. He has authored or co-authored over 300 papers on numerous blood-related topics.

Robert Kwun, M.D., Advisory Board Member, is 43 years of age. He graduated from Harvard University, and then received his medical degree from Columbia University, in New York. His clinical training includes Columbia University's Manhattan Eye Ear and Throat Hospital, Los Angles Children's-USC Medical Center, the Doheny Eye Institute and New York's St. Vincent's Hospital.

Significant Employees.

There are no significant employees.

LKB Partners, LLC

The Company and LKB Partners, LLC entered into an agreement in November 2007 whereby LKB was engaged to provide management consulting services to the Company. These services included handling the duties of general manager and president of the Company. As part of this agreement, Frank Marra of LKB Partners, LLC agreed to handle the duties of president of the Company. LKB Partners, LLC was founded in 2006 and engages in financial and business consulting.

Mr. Marra, age 46, is currently the managing member of LKB Partners, LLC which engages in financial consulting and acts as a private investment firm for small companies. Prior to founding LKB in November 2006, Mr. Marra ran Stonebridge Ross which he founded in 1992 and sold in 2003. Mr. Marra also worked as a registered representative for Drexel Burnham after attending college at the University of West Virginia. Mr. Marra has focused on work with public and private emerging growth companies. As part of Mr. Marra’s consulting work, he has acted as interim CEO for three public companies Sun Cut Floral Distributors from 1999 to 2001, a consolidator of national floral distributors, Interactive Medical Technologies from 1993 to 1995, a biomedical technology company and Rheologics, Inc. from 2005 to 2007 which developed a whole blood viscometer.

As part of the consulting agreement with LKB Partners, LLC and Frank Marra, the Company will pay LKB $8,000 for each month of the 24 month term for these services. We also agreed to pay LKB for these services 150,000 shares (7,500 after giving effect for the 1 to 20 reverse split) of our common stock that are “restricted securities,” of which

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25,000 shares went to Marra personally under a separate Letter Agreement. We also agreed to grant to LKB the option to purchase up to 9.5 percent of the issued and outstanding shares of our common stock at a price of $1.20 per share for a period of two years; provided, however, these options, to the extent not exercised prior thereto, shall be void on March 31, 2008, unless we shall have raised not less than the sum of $500,000 through the efforts of LKB or its associates or affiliates or by persons introduced by it or its associates or affiliates by March 31, 2008, with no proration of options in the event all $500,000 is not raised. The $500,000 was not met and this option expired. We did not have the cash resources to meet all of our payment obligations under our consulting agreements. During 2009, we modified the agreements with LKB and Mr. Marra whereby the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services. Additionally, the Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option. The option would expire on December 31, 2013. LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB. The term of the consulting agreement is twenty-four months.

Pursuant to a consulting agreement dated April 4, 2007, between us and LKB, LKB received 200,000 (10,000 after giving effect to our 1 for 20 reverse stock split) shares of our common stock that are “restricted securities,” and was granted an option to purchase an additional 250,000 shares of our common stock that are “restricted securities” at a price of $1.20 per share for a period of two years ending April 3, 2009. This option was not exercised. On April 4, 2007, the Company also issued 50,000 shares (2,500 shares after giving effect to our 1 for 20 reverse stock split) to Frank Marra.

Family Relationships.

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

Involvement in Certain Legal Proceedings.

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

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(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.

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

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

Filer	Transaction	Date Report Due	Date Report Filed
David E. Nelson, CPA Director, CFO, Secretary/Treasurer	Disposal of 5,500 Shares Acquisition of 1,250 Shares Disposal of 12,331 Warrants Acquisition of 1,250 Shares Acquisition of 1,250 Shares Acquisition of 1,875 Shares Share purchases	10/27/04 4/13/05 1/05/05 10/7/05 5/4/06 1/17/07 12/31/08	4/18/05 4/18/05 4/18/05 3/28/08 3/28/08 3/28/08 3/21/11
Edward L. Kunkel, Esq. Director	Acquisition of 1,250 shares Acquisition of 1,875 Shares Acquisition of 1,250 Shares Acquisition of 1,250 Shares Acquisition of 1,875 Shares	4/13/05 1/17/07 10/7/05 5/4/06 1/17/07	4/19/05 3/26/08 3/28/08 3/28/08 3/31/08
Thomas C. Drees, Ph.D. Director and President	Acquisition of 1,250 Shares Disposal of 10,250 Shares Acquisition of 1,875 Shares Acquisition of 1,250 Shares Acquisition of 1,250 Shares Acquisition of 1,875 Shares	4/13/05 12/22/04 1/17/07 10/7/05 5/4/06 1/17/07	4/19/05 4/19/05 3/26/08 3/28/08 3/28/08 3/31/08
Thomas Drees, Ph.D. Director and President	Acquisition of 1,250 Shares Disposal of 10,250 Shares Acquisition of 1,875 Shares Acquisition of 1,250 Shares Acquisition of 1,250 Shares Acquisition of 1,875 Shares	4/13/05 12/22/04 1/17/07 10/7/05 5/4/06 1/17/07	4/19/05 4/19/05 3/26/08 3/28/08 3/28/08 3/31/08
Frank Marra	Form 3	5/27/09	6/21/10

In addition to the late reports by the above officers, through a series of consulting agreements and option contracts, a consulting firm and individuals acquired the ability to purchase over 10% of our outstanding common stock and acquired additional shares of our common stock that would make such parties greater than 10% shareholders. This firm and/or individual have not made their filings including the form 3 filing required and the filings required under Section 13 of the Exchange Act.

Code of Ethics.

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

Nominating Committee.

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

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If we do establish a Nominating Committee, we will disclose this change to our procedures by which shareholders may recommend nominees to our board of directors.

Audit Committee.

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

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following tables set forth certain summary information concerning the compensation paid or accrued for each of the Company's last three completed fiscal years to the Company's or its principal subsidiaries= chief executive officer and each of its other executive officers that received compensation in excess of $100,000 during such period (as determined at December 31, ~~2008~~2010, the end of the Company's last completed fiscal year):

Name and Principal Position (a)	Year (b)	Salary ($) (c)	Bonus ($) (d)	Stock Awards ($) (e)	Option Awards ($) (f)	Non-Equity Incentive Plan Compensation ($) (g)	Nonqualified Deferred Compensation ($) (h)	All Other Compensation ($) (i)	Total Earnings ($) (j)
Thomas C. Drees, Ph.D., MBA, CEO, President, Chairman of the Board	12/31/09 12/31/08 12/31/07	* * *	0 0 0	* * *	0 0 0	0 0 0	0 0 0	0 0 0	0 0 0
Frank Marra, Ph.D., MBA, CEO, President, Chairman of the Board	12/31/10 12/31/09 12/31/08	* * *	0 0 0	* * *	0 0 0	0 0 0	0 0 0	0 0 0	0 0 0
David E. Nelson, CPA CFO and Director	12/31/09 12/31/08 12/31/07	* * *	0 0 0	* * *	0 0 0	0 0 0	0 0 0	0 0 0	0 0 0
Edward L. Kunkel, Esq. Director	12/31/09 12/31/08 12/31/07	* * *	0 0 0	* * *	0 0 0	0 0 0	0 0 0	0 0 0	0 0 0

* CommencingOn ~~with~~November ~~the~~21, ~~quarter~~2007, ~~ended~~we ~~December~~executed 31a Management Consulting Agreement for a term in perpetuity with Frank Marra, ~~2004~~PhD., ~~members~~whereby ofDr. ~~our~~Drees ~~Board~~was ofengaged ~~Directors~~to provide management consulting services. Dr. Drees will be paid ~~625~~$4,000 ~~shares~~for ofeach ~~common~~month, ~~stock~~in ~~per~~perpetuity ~~quarter~~ for ~~all~~these services, ~~rendered~~as tolong usas we are in ~~lieu~~business ofor ~~employment~~until ~~contracts~~Dr. Drees’ death. ~~See~~The ~~Part~~fee ~~III~~will remain intact until one of the aforementioned conditions occurs. Notwithstanding that the term shall not have been completed, ~~Items~~we 12may ~~and~~terminate 13the Drees Agreement (i) upon the death of Dr. Drees, ~~below~~and (ii) if Dr. Drees should be incapacitated by illness or any other matter from performing his duties hereunder for a continuous period of sixty days. We have not had the funds to meet our ongoing obligations under this agreement.

OnDuring ~~November 21~~2009, ~~2007,~~the weCompany ~~executed~~issued ~~a Management Consulting Agreement for a term in perpetuity with Thomas C. Drees~~1, ~~PhD.~~000,000 ~~our~~shares ~~current~~to ~~President~~LKB Partners, ~~whereby~~LLC ~~Dr.~~for ~~Drees was engaged to provide management~~ consulting services. ~~Dr.~~Additionally, ~~Drees~~the ~~has~~Company agreed to beissue ~~retained~~up to act in the full capacity as Chief Executive Officer for us, which includes, but not be limited to, working with management to help promote our overall growth, evaluating business opportunities, offering input on critical business issues that may arise from time to time, participate in planning for our business future and other like duties9. ~~Dr.~~5 ~~Drees~~percent ~~will~~of bethe ~~paid $4,000 for each month, in perpetuity for these services, as long as we are in business or until Dr. Drees~~Company’s ~~death. In~~outstanding ~~the~~shares ~~event~~of ~~that~~common ~~Dr.~~stock ~~Drees~~at isa ~~relieved~~price of ~~the~~$0.10 ~~obligations~~per ofshare ~~the~~under ~~Drees Agreement and no longer serves as CEO,~~ the ~~fee~~terms ~~will remain intact until one~~ of ~~the~~a ~~aforementioned~~stock ~~conditions occurs~~option. The ~~Notwithstanding~~option ~~that~~would ~~the~~expire ~~term~~on ~~shall~~December ~~not have been completed~~31, we2013. LKB ~~may~~would ~~terminate~~also ~~the~~receive ~~Drees~~a ~~Agreement~~monthly ~~(i)~~fee ~~upon the death~~ of ~~Dr.~~$8,000 ~~Drees~~when, and ~~(ii)~~ if, ~~Dr.~~the ~~Drees~~Company ~~should~~had besuch ~~incapacitated~~funds byavailable ~~illness~~to orpay ~~any~~to ~~other matter from performing his duties hereunder for a continuous period of sixty days~~LKB. WeThe ~~have~~term ~~not had the funds to meet our ongoing obligations under this agreement.~~

~~During 2009, the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services. Additionally, the~~ -16-

of the consulting agreement is twenty-~~21-~~four months.

As part of Mr. Marra’s appointment as a director and president of the Company, Mr. Marra entered into an employment agreement and received stock options. Under the terms of Mr. Marra’s employment agreement he will receive an annual salary of one hundred fifty thousand dollars ($150,000) subject to such increases as may from time to time be determined by the board of directors of the Company. Additionally, the term of the contract is for a period of twenty-four (24) months. Mr. Marra received three million (3,000,000) stock options exercisable at twenty cents ($0.20) per share for a period of five years.

Outstanding Equity Awards.

See the heading "Compensation of Directors" below. Also, see the heading “Securities Authorized for Issuance Under Equity Compensation Plans” in Part II, Item 5, above.

Compensation of Directors.

~~All directors~~Currently, ~~executive~~the ~~officers~~existing ~~and~~directors ~~Medical~~are ~~Advisory~~receiving ~~Board~~no ~~Members will be paid 2,500 shares of our common stock per year, in quarterly issuances~~compensation.

Changes in Control.

To our knowledge, there are no present arrangements or pledges of our securities that may result in a change in control of our Company. However, based on the agreements entered into in November 2007, between us and LKB, Terra Silex, and Dr. Drees and LKB, and Dr. Drees and Terra Silex, Terra Silex and LKB have accumulated the potential to acquire substantial numbers of our common stock. Accordingly, these agreements may be deemed to involve a “change in control” of our Company, especially if all options are exercised.

Securities Authorized for Issuance under Equity Compensation Plans.

Equity Compensation Plan Information

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
	(a)	(b)	(c)
Equity compensation plans approved by security holders	03,000,000	$0.20	03,000,000
Equity compensation plans not approved by security holders	0	0	0
Total	03,000,000	$0.20	03,000,000

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following tables set forth the share holdings of our directors and executive officers and those persons who own more than five percent of our common stock as of March 2631, ~~2010~~2011:

Security Ownership of Certain Beneficial Owners.

Name and Address	Number of Shares Beneficially Owned	Percent of Class (1)
Thomas C. Drees, Ph.D., MBA (2) 101 East Green Street, #11 Pasadena, California 91105	1,855,782	27.8%
Frank Marra, (2) 110 Founders Mill Court Roswell, GA	4,863,282	46.88%
LKB Partners, LLC 3502 Scotts Lane #1221 Philadelphia, PA 19129	1,876,433	28.1%
LKB Partners, LLC (3) 3502 Scotts Lane #1221 Philadelphia, PA 19129	1,795,457	17.31%
Thomas C. Drees (4) 874 Sierra Madre Villa VePasadena, CA 91107	1,863,282	17.96%

______________________

(1) Based upon 6,~~682~~704,~~072~~572shares ~~shares~~ of outstanding common stock on March 2631, ~~2010~~2011 along with the options issuable to Mr. Marra and LKB Partners, LLC as outlined above. All percentages assume the exercise of all options.

(2) In Draddition to Mr. ~~Drees~~Marra’s ~~owns~~interest ~~approximately~~in 1LKB Partners,~~576~~ LLC,~~325~~ ~~shares~~Mr. inMarra ~~his~~has ~~own~~a ~~name~~stock ~~and~~option ~~279~~to acquire up to 3,~~457~~000,000 shares of common stock. These options are included as part of his calculations along with his ownership in LKB Partners. Mr. Marra’s percentage calculation assume the ~~name~~exercise of ~~the~~his ~~Drees~~option ~~Family~~and ~~Trust~~that ~~which~~of heLKB isPartners aoutlined ~~co-trustee~~in ~~with~~note ~~his~~3 ~~wife~~hereof.

(3) LKB Partners, LLC is controlled by Frank Marra. In addition to the 1,~~175~~125,000 shares owed by LKB Partners, LLC, it has an option to acquire 9.5% of the Company’s common stock at an exercise price of $0.10 per share, which based on the number of shares presently outstanding would result in the issuance of another ~~701~~670,~~433~~457 shares to LKB Partners, LLC.

(4) Dr. Drees owns approximately 1,576,325 shares in his own name and 279,457 shares in the name of the Drees Family Trust which he is a co-trustee with his wife.

Security Ownership of Management.

Name and Address	Number of Shares Beneficially Owned	Percent of Class (1)
Thomas C. Drees, Ph.D., MBA 101 East Green Street, #11 Pasadena, California 91105	1,855,782	27.8%
Frank Marra	4,863,282	46.88%
David E. Nelson, CPA 528 14th Avenue Salt Lake City, Utah 84103	83,341	1.2%
Dr. Thomas C. Drees	1,863,282	17.96%
Edward L. Kunkel, Esq. 16 N. Marengo Ave, #517 Pasadena, California 91103	13,125	0.21%
All directors and officers as a group (three persons)	16,~~952~~739,~~248~~689	2964.294%

_____________________________

(1) Based upon 6,~~682~~704,~~072~~572shares ~~shares~~ of outstanding common stock on March 2631, ~~2010~~2011 along with the options issuable to Mr. marra and LKB Partners, LLC as outlined above. All percentages assume the exercise of all options.

Indirect and Direct ownership are referenced by an "I" or "D", respectively. All shares owned directly are owned beneficially and of record and such shareholder has sole voting, investment, and dispositive power, unless otherwise noted.

-18-

Transactions with Related Persons.

Related party payables, represents amounts owed to our officers for reimbursement of expenses paid on behalf of the Company. For 2010 and 2009, related party payables were $182,675 and $122,428, respectively.

~~-23-~~On November 21, 2007, we executed an agreement with Thomas Drees , PhD. for a term in perpetuity., whereby Dr. Drees was engaged to provide management consulting services. Dr. Drees has agreed to be retained to act in the full capacity as Chief Executive Officer for us, which includes, but not be limited to, working with management to help promote our overall growth, evaluating business opportunities, offering input on critical business issues that may arise from time to time, participate in planning for our business future and other like duties. Dr. Drees will be paid $4,000 for each month, in perpetuity for these services, as long as we are in business or until Dr. Drees’ death. In the event that Dr. Drees is relieved of the obligations of the Drees Agreement and no longer serves as CEO, as is the case, the fee will remain intact until one of the aforementioned conditions occurs. Notwithstanding that the term shall not have been completed, we may terminate the Drees Agreement (i) upon the death of Dr. Drees, and (ii) if Dr. Drees should be incapacitated by illness or any other matter from performing his duties hereunder for a continuous period of sixty days.

Company. For 2009 and 2008, related party payables were $122,428 and $38,461, respectively.

On November 21, 2007, we executed an agreement with Thomas C. Drees, PhD. for a term in perpetuity with Dr. Drees, PhD., our current President, whereby Dr. Drees was engaged to provide management consulting services. Dr. Drees has agreed to be retained to act in the full capacity as Chief Executive Officer for us, which includes, but not be limited to, working with management to help promote our overall growth, evaluating business opportunities, offering input on critical business issues that may arise from time to time, participate in planning for our business future and other like duties. Dr. Drees will be paid $4,000 for each month, in perpetuity for these services, as long as we are in business or until Dr. Drees’ death. In the event that Dr. Drees is relieved of the obligations of the Drees Agreement and no longer serves as CEO, the fee will remain intact until one of the aforementioned conditions occurs. Notwithstanding that the term shall not have been completed, we may terminate the Drees Agreement (i) upon the death of Dr. Drees, and (ii) if Dr. Drees should be incapacitated by illness or any other matter from performing his duties hereunder for a continuous period of sixty days.

During 2009, the Company issued 1,000,000 shares to LKB Partners, LLC for consulting services. Additionally, the Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option. The option would expire on December 31, 2013. LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB. The term of the consulting agreement is twenty-four months.

Except as indicated above, there have been no material transactions, series of similar transactions or currently proposed transactions, to which our Company was or is to be a party, in which the amount involved exceeded $60,000 and in which any director or executive officer, or any security holder who is known to us to own of record or beneficially more than five percent of our common stock, or any member of the immediate family of any of the foregoing persons, or any promoter or founder had a material interest. As part of a series of contracts entered into in November 2007, several consulting firms were issued shares of our common stock. For further information on the issuance of shares to the consulting firms and individuals see Business Development under Item 1-Descritption of Business herein.

Parents of the Issuer.

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

Transactions with Promoters and Control Persons.

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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the fees billed to us by our principal accountants during the calendar years ended December 31, ~~2009~~2010, and December 31, ~~2008~~2009:

Fee Category	~~2009~~2010		~~2008~~2009
Audit Fees	$	1719,~~778~~426	$	1817,~~500~~778
Audit-related Fees		0		0
Tax Fees		1,~~031~~268		21,~~039~~031
All Other Fees		0		0
Total Fees	$	1820,~~809~~694	$	2018,~~539~~809

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

-19-

annual financial statements and the review of financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.

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

-24-

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

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

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors.

We do not have an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services to be provided us by our principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.

ITEM 15. EXHIBITS

Exhibit

Number Description

3.1

Articles of Amendment increasing the authorized shares-Definitive Information Statement filed

12/23/2005**

3.2

Amendment to the Articles of Incorporation reflecting 1 for 20 reverse stock split.**

3.3

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

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

31.1

302 Certification of ~~Thomas~~Frank ~~C. Drees, Ph.D.~~Marra

31.2

302 Certification of David E. Nelson

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.

-2520-

SIGNATURES

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

SANGUINE CORPORATION

ByDate: ~~/s/~~ ~~Thomas~~April C.11, ~~Drees~~2011

~~Date~~By: /s/ ~~April~~Frank ~~12, 2010~~Marra

~~Thomas~~Frank ~~C. Drees~~Marra, ~~Ph.D.~~CEO, ~~MBA,~~Principal ~~CEO~~Financial Officer

By: /s/ David E. Nelson

Date: April 12, 2010

David E. Nelson, CPA, CFO

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates stated.

Date: April 1211, ~~2010~~2011

By: /s/Frank Marra

Frank Marra, Director

Date: April 11, 2011

By: /s/Thomas C. Drees

Thomas C. Drees, Ph.D., MBA

~~CEO, President and Chairman of the~~ Directors

~~Board~~Date: ofApril ~~Directors~~11, 2011

Date: April 12, 2010

By: /s/ David E. Nelson

David E. Nelson, CPA

CFO and Director

Date: April 12, 2010

By: /s/ Edward L. Kunkel

Edward L. Kunkel, Director

-2621-

SANGUINE CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2009~~2010 and ~~2008~~2009

F-1

C O N T E N T S

Report of Independent Registered Public Accounting Firm

F - 3

Consolidated Balance Sheets

F - 4

Consolidated Statements of Operations

F - 6

Consolidated Statements of Shareholders’ Equity (Deficit)

F - 7

Consolidated Statements of Cash Flows

F - 14

Notes to the Consolidated Financial Statements

F - 16

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Sanguine Corporation and Subsidiary

(A Development Stage Company)

Pasadena, California

We have audited the accompanying consolidated balance sheets of Sanguine Corporation and Subsidiary (Aa Development Stage Company) as of December 31, ~~2009~~2010 and ~~2008~~2009, and the related consolidated statements of operations, shareholders' equity (deficit), and cash flows for ~~each of~~ the ~~two~~ years inthen ~~the period~~ ended ~~December 31, 2009,~~ and for the period from inception of the development stage on January 18, 1990, through December 31, ~~2009~~2010. 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 ~~consolidated~~ financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the ~~consolidated~~ financial statements~~. An~~, ~~audit also includes~~ assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall ~~consolidated~~ 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 ~~(A Development Stage Company)~~ as of December 31, ~~2009~~2010 and ~~2008~~2009, and the results of their operations and their cash flows for ~~each of~~ the ~~two~~ years inthen ~~the period~~ ended ~~December 31, 2009,~~ and for the period from inception of the development stage on January 18, 1990, through December 31, ~~2009~~2010, in conformity with U.S. generally accepted accounting principles.

WeThe ~~were~~accompanying ~~not~~financial ~~engaged~~statements tohave ~~examine~~been ~~management's~~prepared ~~assessment~~assuming ofthat the ~~effectiveness~~Company ofwill ~~Sanguine~~continue ~~Corporation's~~as ~~internal~~a ~~control~~going ~~over~~concern. ~~financial~~As ~~reporting~~discussed asin ofNote ~~December~~7 ~~31,~~to ~~2009~~the financial statements, ~~included~~the Company has suffered significant recurring losses which have resulted in an accumulated deficit. This raises substantial doubt about the ~~accompanying~~Company's ~~Form~~ability ~~10-K~~to ~~and,~~continue ~~accordingly,~~as wea going concern. Management's plans in regard to these matters are also described in Note 7. The financial statements do not ~~express~~include anany ~~opinion~~adjustments ~~thereon~~that might result from the outcome of this uncertainty.

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

/s/HJ & Associates & Consultants, LLP

HJ Associates & Consultants, LLP

Salt Lake City, Utah

April 1211, ~~2010~~2011

F-3

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Balance Sheets

ASSETS

		December 31, 2009		December 31, 2008
		December 31, 2010		December 31, 2009
CURRENT ASSETS
Cash	$	1,~~928~~195	$	1,~~159~~928
Prepaid expenses		167,701		111,375
Accounts receivable		28,000		-
Total Current Assets		169,629		112,534
Prepaid expenses		-		167,701
PROPERTY AND EQUIPMENT, NET		716		1,194
Total Current Assets		29,195		169,629
PROPERTY AND EQUIPMENT, NET		463		716
OTHER ASSETS
Long term prepaid expenses		~~55,987~~-		-55,987
TOTAL ASSETS	$	~~226~~29,~~332~~658	$	~~113~~226,~~728~~332

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

F-4

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Balance Sheets

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

		December 31, 2009		December 31, 2008
		December 31, 2010		December 31, 2009
CURRENT LIABILITIES
Accounts payable	$	~~344~~244,~~316~~359	$	~~319~~344,~~851~~316
Accrued interest		~~420~~2,330		-420
Related party payable		~~122~~182,~~428~~675		38122,~~461~~428
Notes payable		929,~~000~~700		-9,000
Accrued compensation		26,~~931~~075		162,~~319~~931
Total Current Liabilities		~~479~~465,~~095~~139		~~374~~479,~~631~~095
Total Liabilities		~~479~~465,~~095~~139		~~374~~479,~~631~~095
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY (DEFICIT)
Preferred stock, 10,000,000 shares authorized of $0.001 par value, no shares issued and outstanding, respectively		-		-
Preferred stock, 10,000,000 shares authorized of $0.001 par value, 150,000 and 0 shares issued and outstanding, respectively		150		-
Common stock, 200,000,000 shares authorized of $0.001 par value, 6,682,072 and 5,164,572 shares issued and outstanding, respectively		6,682		5,165
Common stock, 200,000,000 shares authorized of $0.001 par value, 6,682,072and 6,682,072 shares issued and outstanding, respectively		6,682		6,682
Additional paid in capital		8,~~531~~697,~~300~~935		8,~~161~~531,~~055~~300
Preferred stock subscribed		258,~~000~~500		-25,000
Deficit accumulated during the development stage		(89,~~815~~148,~~745~~748)		(8,~~427~~815,~~123~~745)
Total Shareholders’ Equity (Deficit)		(~~252~~435,~~763~~481)		(~~260~~252,~~903~~763)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)	$	~~226~~29,~~332~~658	$	~~111~~226,~~728~~332

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

F-5

~~SANGINE~~SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Operations

For the Year Ended December 31,		From Inception of the Development Stage on January 18, 1990 through December 31
2009	2008	2009
2010	2009	2010

REVENUES	$	-32,970	$	-	$	~~191~~224,~~762~~732
COST OF SALES		18,297		-		18,297
GROSS PROFIT		14,673		-		206,435
OPERATING EXPENSES
Professional fees		~~343~~362,~~957~~309		1343,~~063,417~~957		5,~~053~~415,~~473~~782
Research and development		-		-		1,973,158
Selling, general and administrative		3558,~~851~~688		8235,~~408~~851		2,~~820~~879,~~528~~216
Total Operating Expenses		~~379~~420,~~808~~997		1379,~~145,825~~808		910,~~847~~268,~~159~~156
LOSS FROM OPERATIONS		(~~379~~406,~~808~~324)		(1379,~~145,825~~808)		(910,~~655~~061,~~397~~721)
OTHER INCOME (EXPENSE)
Interest income		2-		~~688~~2		40,195
Interest expense		(712,~~130~~177)		(~~644~~7,130)		(~~675~~687,~~760~~937)
Loss on cash deposit		-		-		(10,020)
Gain (loss) on foreign currency exchange		(18,~~686)~~297		4(1,~~611~~686)		(179,~~396~~099)
Gain on settlement of debt		-77,201		~~5,726~~-		1,~~502~~579,~~633~~834
Total Other Income (Expense)		(873,~~814)~~321		10(8,~~381~~814)		~~839~~912,~~652~~973
NET LOSS	$	(~~388~~333,~~622~~003)	$	(1388,~~135,444~~622)	$	(89,~~815~~148,~~745~~748)
BASIC LOSS PER SHARE	$	(0.0605)	$	(0.2206)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING –BASIC		6,~~070~~682,~~914~~072		56,~~089~~070,~~200~~914

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

F-6

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)


	Preferred Stock			Common Stock					Additional Paid-in Capital		Expenses Prepaid with Common Stock		Stock Subscribed			Deficit Accumulated During the Development Stage			Accumulated Other Compre-hensive Income
	Shares		Amount		Shares		Amount
Balance, January 18, 1990 Retroactive restated	-	$	-		71,418	$	71	$	2,424,571	$	-	$		-	$		(2,464,642)	$		-
Net income from January 1, 1990 through January 1, 1991	-		-		-		-		-		-			-			73,917			-
Balance, December 31, 1991	-		-		71,418		71		2,424,571		-			-			(2,390,725)			-
Common stock issued for services provided at $0.001 per share	-		-		136		1		1		-			-			-			-
Contributed capital by officer	-		-		-		-		750		-			-			-			-
Net loss for the year ended December 31, 1992	-		-		-		-		-		-			-			(77,011)			-
Balance, December 31, 1992	-		-		71,554		72		2,425,322		-			-			(2,467,736)			-
Common stock issued to acquire 94% of outstanding stock of Sanguine Corporation	-		-		729,489		729		13,861		-			-			(14,590)			-
Common stock for cash at $4.31 per share	-		-		25,500		25		109,975		-			-			-			-
Net loss for the year ended December 31, 1993	-		-		-		-		-		-			-			(92,895)			-
Balance, December 31, 1993	-		-		826,543		826		2,549,158		-			-			(2,575,221)			-
Quasi-reorganization	-		-		-		-		(2,423,964)		-			-			2,423,964			-
Common stock for cash at $7.85 per share	-		-		9,550		10		74,990		-			-			-			-
Net loss for the year ended December 31, 1994	-		-		-		-		-		-			-			(230,779)			-
Balance, December 31, 1994	-		-		836,093		836		200,184		-			-			(382,036)			-
Common stock issued for debt and payables at $2.13 per share	-		-		60,800		61		129,203		-			-			-			-
Common stock issued for services at $2.50 per share	-		-		81,250		81		203,044		-			-			-			-
Balance Forward	-	$	-		978,143	$	978	$	532,431	$	-	$		-	$		(382,036)	$		-

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

F-7

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)


	Preferred Stock			Common Stock						Additional Paid-in Capital			Expenses Prepaid with Common Stock				Stock Subscribed			Deficit Accumulated During the Development Stage			Accumulated Other Comprehensive Income
	Shares		Amount		Shares		Amount
Balance Forward	-	$	-	978,143		$		978	$		532,431	$		-	$	-		$	(382,036)		$	-
Net loss for the year ended December 31, 1995	-		-	-				-			-			-		-			(366,843)			-
Balance, December 31, 1995	-		-	978,143				978			532,431			-		-			(748,879)			-
Common stock issued for cash at $5.00 per share	-		-	500				1			2,499			-		-			-			-
Common stock issued for debt and payables at $4.97 per share	-		-	16,275				16			80,915			-		-			-			-
Common stock issued for services at $0.02 per share	-		-	48,968				49			930			-		-			-			-
Net loss for the year ended December 31, 1996	-		-	-				-			-			-		-			(210,017)			-
Balance, December 31, 1996	-		-	1,043,886				1,044			616,775			-		-			(958,896)			-
Common stock issued for services at $1.87 per share	-		-	5,000				5			9,329			-		-			-			-
Net loss for the year ended December 31, 1997	-		-	-				-			-			-		-			(166,212)			-
Balance, December 31, 1997	-		-	1,048,886				1,049			626,104			-		-			(1,125,108)			-
Common stock issued for cash at $2.00 per share	-		-	60,900				61			122,139			-		-			-			-
Common stock issued for debt and payables at $4.33 per share	-		-	12,000				12			53,115			-		-			-			-
Common stock issued for services at $2.33 per share	-		-	33,725				34			78,593			-		-			-			-
Shares canceled	-		-	(5,000)				(5)			5			-		-			-			-
Net loss for the year ended December 31, 1998	-		-	-				-			-			-		-			(366,439)			-
Balance, December 31, 1998	-	$	-	1,150,511		$		1,151	$		879,956	$		-	$	-		$	(1,491,547)		$	-

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

F-8

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)


	Preferred Stock				Common Stock					Additional Paid-in Capital			Expenses Prepaid with Common Stock			Stock Subscribed			Deficit Accumulated During the Development Stage			Accumulated Other Compre-hensive Income
	Shares		Amount	Shares			Amount
Balance, December 31, 1998	-	$	-	1,150,511		$	1,151	$	879,956		$	-		$	-		$	(1,491,547)		$	-
Common stock issued for cash at $3.60 per share	-		-	2,639			3		9,497			-			-			-			-
Common stock issued for services at $2.00 per share	-		-	5,000			5		9,995			-			-			-			-
Net loss for the year ended December 31, 1999	-		-	-			-		-			-			-			(217,864)			-
Balance, December 31, 1999	-		-	1,158,150			1,159		899,448			-			-			(1,709,411)			-
Common stock issued for cash at $3.83 per share	-		-	165,913			166		635,154			-			-			-			-
Common stock issued for services at $5.26 per share	-		-	81,496			81		428,919			-			-			-			-
Net loss for the year ended December 31, 2000	-		-	-			-		-			-			-			(1,444,616)			-
Balance, December 31, 2000	-		-	1,405,559			1,406		1,963,521			-			-			(3,154,027)			-
Common stock issued for services at $5.00 per share	-		-	6,250			6		31,245			-			-			-			-
Common stock issued for services at $4.60 per share	-		-	3,750			4		17,246			-			-			-			-
Common stock issued for services at $2.52 per share	-		-	41,250			41		103,909			-			-			-			-
Common stock issued for services at $3.42 per share	-		-	2,500			3		8,547			-			-			-			-
Common stock issued for prepaid services at $4.60 per share	-		-	12,500			13		57,487			(57,500)			-			-			-
Common stock issued for commission of private placement of common stock	-		-	16,360			16		(16)			-			-			-			-
Balance Forward	-	$	-	1,488,169		$	1,489	$	2,181,939		$	(57,500)		$	-		$	(3,154,027)		$	-

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

F-9

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)


	Preferred Stock			Common Stock						Additional Paid-in Capital				Expenses Prepaid with Common Stock		Stock Subscribed				Deficit Accumulated During the Development Stage		Accumulated Other Compre-hensive Income
	Shares		Amount		Shares		Amount
Balance Forward	-	$	-		1,488,169	$		1,489	$		2,181,939	$	(57,500)		$		-	$	(3,154,027)		$		-
Common stock issued for acquisition of subsidiary stock held by minority shareholders	-		-		42,010			42			(42)		-				-		-				-
Amortization of prepaid Expenses	-		-		-			-			-		43,125				-		-				-
Net loss for the year ended December 31, 2001	-		-		-			-			-		-				-		(1,037,570)				-
Balance, December 31, 2001	-		-		1,530,179			1,531			2,181,897		(14,375)				-		(4,191,597)				-
Additional common stock issued for acquisition of subsidiary stock held by minority shareholders in prior year	-		-		3,502			3			(3)		-				-		-				-
Common stock issued for services at $1.20 and $3.20 per share	-		-		80,750			81			58,656		-				-		-				-
Warrants issued for services	-		-		-			-			989,956		-				-		-				-
Common stock issued for prepaid services at $1.14 per share	-		-		85,000			85			96,425		(96,510)				-		-				-
Common stock issued for Cash-less warrant exercise at $1.20 - $2.60 per share	-		-		25,000			25			103,600		-				-		-				-
Common stock issued for exercise of warrants for cash at $1.60 per share	-		-		15,500			16			24,784		-				-		-				-
Amortization of prepaid Expenses	-		-		-			-			-		14,375				-		-				-
Net loss for the year ended December 31, 2002	-		-		-			-			-		-				-		(1,729,701)				-
Balance, December 31, 2002	-	$	-		1,739,931	$		1,741	$		3,455,315	$	(96,510)		$		-	$	(5,921,298)		$		-

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

F-10

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)


	Preferred Stock				Common Stock							Additional Paid-in Capital			Expenses Prepaid with Common Stock			Stock Subscribed			Deficit Accumulated During the Development Stage			Accumulated Other Compre-hensive Income
	Shares		Amount			Shares			Amount
Balance, December 31, 2002	-	$		-			1,739,931	$		1,741	$		3,455,315	$		(96,510)	$		-	$		(5,921,298)	$		-
Common stock issued for cash-less option exercise at $0.60 and $0.80 per share for services and prepaid services	-			-			31,250			31			23,969			(19,231)			-			-			-
Common stock issued for services at $0.60 - $2.20 per share	-			-			7,500			7			9,181			-			-			-			-
Common stock issued for debt at $0.60 and $0.40 per share	-			-			103,168			103			54,924			-			-			-			-
Common stock issued for debt and prepaid expenses at $1.60 per share	-			-			50,000			50			79,950			(62,943)			-			-			-
Amortization of prepaid Expenses	-			-			-			-			-			115,741			-			-			-
Net loss for the year ended December 31,2003	-			-			-			-			-			-			-			(324,531)			-
Balance, December 31, 2003	-			-			1,931,849			1,932			3,623,339			(62,943)			-			(6,245,829)			-
Common stock issued for cash-less option exercise at $1.20 and $1.60 per share for services	-			-			176,433			176			249,545			-			-			-			-
Common stock issued for services at $5.20 per share	-			-			7,500			8			38,992			62,943			-			-			-
Common stock issued for debt at $0.80 and $1.40 per share	-			-			1,665,125			1,665			1,351,062			-			-			-			-
Common stock issued for Cash at $1.60-$3.00 per share	-			-			162,057			162			329,128			-			-			-			-
Common stock issued for Cash-less warrant exercise at $0.001 per share	-			-			4,181			4			(4)			-			-			-			-
Net income for the year ended December 31, 2004	-			-			-			-			-			-			-			843,384			-
Balance, December 31, 2004	-	$		-			3,947,145	$		3,947	$		5,592,062	$		-	$		-	$		(5,402,445)	$		-

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

F-11

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)


	Preferred Stock			Common Stock							Additional Paid-in Capital			Expenses Prepaid with Common Stock			Stock Subscribed			Deficit Accumulated During the Development Stage			Accumulated Other Compre-hensive Income
	Shares		Amount			Shares		Amount
Balance, December 31, 2004	-	$	-		3,947,145		$		3,947	$		5,592,062	$		-	$		-	$		(5,402,445)	$		-
Common stock issued for services at $2.20-$6.00 per share	-		-		20,625				21			81,105			-			-			-			-
Common stock issued for Cash at $1.74 per share	-		-		59,663				60			104,000			-			-			-			-
Common stock issued for Debt reduction at $1.20 per share	-		-		8,000				8			9,592			-			-			-			-
Net loss for the year ended December 31, 2005	-		-		-				-			-			-			-			(337,751)			-
Balance, December 31, 2005	-		-		4,035,433				4,036			5,786,759			-			-			(5,741,196)			-
Common stock issued for services at $2.40-$5.00 per share	-		-		36,250				36			143,776			-			-			-			-
Common stock issued for Cash at $1.60 per share	-		-		12,500				13			19,988			-			-			-			-
Common stock Subscribed	-		-		-				-			-			-			27,800			-			-
Contributed capital for Contributed interest on Notes payable	-		-		-				-			520			-			-			-			-
Loss on Foreign Currency Exchange	-		-		-				-			-			-			-			-			(2,570)
Net loss for the year ended December 31, 2006	-		-		-				-			-			-			-			(617,335)			-
Balance, December 31, 2006	-		-		4,084,183				4,085			5,951,043			-			27,800			(6,357,531)			(2,570)
Common stock issued for services at $1.80-$4.60 per share	-		-		20,625				21			61,166			-			-			-			-
Common stock issued for Cash at $1.20 per share	-		-		37,333				37			44,763			-			(27,800)			-			-
Common stock issued for Cash at $1.60 per share	-		-		62,500				63			99,937			-			-			-			-
Common stock issued for services per consulting agreement at $2.40 per share	-		-		250,000				250			599,750			-			-			-			-
Common stock issued for services per consulting agreement at $1.62 per share	-		-		333,750				333			540,342			-			-			-			-
Balance Forward	-	$	-		4,788,391		$		4,789	$		7,297,001	$		-	$		-	$		(6,357,531)	$		(2,570)

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

F-12

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)

	Preferred Stock			Common Stock					Additional Paid-in Capital		Expenses Prepaid with Common Stock		Stock Subscribed		Deficit Accumulated During the Development Stage		Accumulated Other Compre-hensive Income
	Shares		Amount		Shares		Amount
Balance Forward	-	$	-		4,788,391	$	4,789	$	7,297,001	$	-	$	-	$	(6,357,531)	$	(2,570)
Common stock issued for Cash at $1.00 per share	-		-		100,000		100		99,900		-		-		-		-
Contributed capital for options granted	-		-		-		-		380,605		-		-		-		-
Warrants extension	-		-		-		-		34,493		-		-		-		-
Adjustment to Unrealized Loss on Foreign Currency Exchange	-		-		-		-		-		-		-		-		2,570
Net loss for the year ended December 31, 2007	-		-		-		-		-		-		-		(934,148)		-
Balance, December 31, 2007	-		-		4,888,391	$	4,889	$	7,811,999	$	-	$	-	$	(7,291,679)	$	-
Common stock issued for services per consulting agreement at $1.20-$2.50 per share	-		-		17,500		17		33,671		-		-		-		-
Common stock issued for services at $1.40 per share	-		-		25,000		25		34,975		-		-		-		-
Common stock issued for Cash at $1.20 per share	-		-		233,681		234		279,766		-		-		-		-
Contributed interest on Related party payables	-		-		-		-		644		-		-		-		-
Net loss for the year ended December 31, 2008	-		-		-		-		-		-		-		(1,135,444)		-
Balance, December 31, 2008	-		-		5,164,572		5,165		8,161,055		-		-		(8,427,123)		-
Common stock issued for services at $0.18-$1.40 per share	-		-		17,500		17		16,300		-		-		-		-
Contributed interest on Related party payables	-		-		-		-		6,709		-		-		-		-
Common stock issued for services per consulting agreement at $0.16- $0.17 per share	-		-		1,500,000		1,500		238,500		-		-		-		-
Stock options issued	-		-		-		-		108,736		-		-		-		-
Preferred stock subscribed	-		-		-		-		-		-		25,000		-		-
Net loss for the year ended December 31, 2009	-		-		-		-		-		-		-		(388,622)		-
Balance, December 31, 2009	-	$	-		6,682,072	$	6,682	$	8,531,300	$	-	$	25,000	$	(8,815,745)	$	-
Contributed interest on Related party payables	-		-		-		-		10,266		-		-		-		-
Preferred stock subscribed	-		-		-		-		-		-		8,500
Preferred stock issued for cash at $1.00 per share	150,000		150		-		-		149,850		-		(25,000)		-		-
Reversal of accrued Compensation	-		-		-		-		6,519		-		-		-		-
Net loss for the year ended December 31, 2010	-		-		-		-		-		-		-		(333,003)		-
Balance, December 31, 2010	150,000	$	150		6,682,072	$	6,682	$	8,697,935	$	-	$	8,500	$	(9,148,748)	$	-

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

F-13

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Cash Flows

	For the Year Ended December 31,			From Inception of the Development Stage on January 18, 1990 through December 31,				~~From Inception of the Development Stage on January 18, 1990 through December 31,~~
	2009			2008				2009
	2010		2009	2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(388,622)		$	(1,135,444)	$		(8,815,745)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation			477			373			6,280
Common stock issued for services			-			35,000			3,365,446
Contributed capital			6,709			645			7,874
Stock warrants granted			-			-			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			-			(5,726)			(104,552)
Gain on conversions of debt to equity			-			-			(1,398,081)
Recognition of prepaid expenses and expenses prepaid with common stock			-			-			456,184
Warrant extension			-			-			34,493
Gain/Loss on foreign currency exchange			1,686			(4,611)			17,396
Changes in assets and liabilities:
(Increase) decrease in prepaid expense			236,422			770,384			975,030
Increase (decrease) in accounts payable			106,746			(2,531)			744,801
Increase in accrued interest payable			420			-			547,699
Increase in accrued liabilities			-			-			10,125
Increase in customer deposits`			-			-			45,000
Increase in accrued salaries			2,931			40,067			977,998
Net Cash Used by Operating Activities			(33,231)			(301,843)			(2,364,702)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for fixed assets			-			(895)			(6,995)
Net Cash Used by Investing Activities			-			(895)			(6,995)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from warrant conversion			-			-			524,700
Proceeds from notes payable and notes payable- related party			9,000			8,461			231,600
Payments on notes payable and notes payable – related party			-			-			(15,400)
Proceeds from issuance of convertible debentures			-			-			40,000
Preferred stock subscription			25,000			-			25,000
Contributed capital			-			-			750
Common stock issued for cash			-			280,000			1,566,975
Net Cash Provided by Financing Activities			34,000			288,461			2,373,625
NET INCREASE (DECREASE) IN CASH			769			(14,277)			1,928
CASH AT BEGINNING OF PERIOD			1,159			15,436			-
CASH AT END OF PERIOD		$	1,928		$	1,159	$		1,928

F-14


CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(333,003)	$	(388,622)	$	(9,148,748)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation		253		477		6,533
Common stock issued for services		-		-		3,365,446
Contributed capital		10,266		6,709		18,140
Stock warrants granted		-		-		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		(77,201)		-		(181,753)
Gain on conversions of debt to equity		-		-		(1,398,081)
Recognition of prepaid expenses and Expenses prepaid with common stock		-		-		456,184
Warrant extension		-		-		34,493
(Gain)/Loss on foreign currency exchange		(8,297)		1,686		9,099
Changes in assets and liabilities:
Decrease in prepaid expense		223,687		236,422		1,198,717
(Increase) in accounts receivable		(28,000)		-		(28,000)
Increase in accounts payable and related party payables		45,788		106,746		790,589
Increase in accrued interest payable		1,911		420		549,610
Increase in accrued liabilities		-		-		10,125
Increase in customer deposits`		-		-		45,000
Increase in accrued salaries		9,663		2,931		987,661
Net Cash Used by Operating Activities		(154,933)		(33,231)		(2,519,635)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for fixed assets		-		-		(6,995)
Net Cash Used by Investing Activities		-		-		(6,995)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from warrant conversion		-		-		524,700
Proceeds from notes payable and notes payable- related party		28,200		9,000		259,800
Payments on notes payable and notes payable – related party		(7,500)		-		(22,900)
Proceeds from issuance of convertible debentures		-		-		40,000
Preferred stock subscription		8,500		25,000		33,500
Contributed capital		-		-		750
Preferred stock issued for cash		125,000		-		125,000
Common stock issued for cash		-		-		1,566,975
Net Cash Provided by Financing Activities		154,200		34,000		2,527,825

NET INCREASE (DECREASE) IN CASH		(733)		769		1,195
CASH AT BEGINNING OF PERIOD		1,928		1,159		-
CASH AT END OF PERIOD	$	1,195	$	1,928	$	1,195

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Cash Flows (Continued)

For the Year Ended December 31,		From Inception of the Development Stage on January 18, 1990 through December 31,
2009	2008	2009
2010	2009	2010

SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES
CASH PAID FOR:
Interest	$	-	$	-	$	-
Income taxes	$	~~1,700~~-	$	-1,700	$	12,~~700~~500
NON-CASH ACTIVITIES
Common stock issued for debt conversion	$	-	$	-	$	9,600
Equity instruments issued for services rendered	$	~~16,319~~-	$	3316,~~688~~319	$	3,236,641
Contributed capital for interest contributed	$	610,~~709~~266	$	~~645~~6,709	$	718,~~874~~140
Interest on beneficial conversion feature	$	-	$	-	$	25,000
Legal related to beneficial conversion feature	$	-	$	-	$	3,750
Notes payable issued for services	$	-	$	-	$	727,950
Common stock issued for prepaid services	$	~~348,735~~-	$	-348,735	$	585,019
Common stock issued for debt	$	-	$	-	$	2,822,067

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

F-15

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, ~~2009~~2010 and ~~2008~~2009

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 oxygen carriers 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.

On March 7, 2008, the Company formed a wholly owned subsidiary called Sanguine Lifescience Corporation. As part of the formation of Sanguine Lifescience Corporation, the Company transferred $15,000 to a bank account for Sanguine Lifescience use. At this time, Sanguine Lifescience Corporation is not engaged in any business other than normal corporate matters.

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.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.

Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) attributable to common shares for the period by the weighted average number of common and potential common shares outstanding during the period. Potential common shares, composed of incremental common shares issuable upon the exercise of stock options and warrants, are included in the calculation of diluted net loss per share to the extent such shares are dilutive.

F-16

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, ~~2009~~2010 and ~~2008~~2009

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

d. Basic Loss Per Share (continued)

The following table sets forth the computation of basic loss per share for the periods indicated:

	For the Years Ended December 31,
		2009		2008
		2010		2009
Loss (numerator)	$	(~~388~~333,~~622~~003)	$	(1388,~~135,444~~622)
Shares (denominator)		6,~~070~~682,~~914~~072		56,~~089~~070,~~200~~914
Net loss per common share – basic and diluted	$	(.0605)	$	(.2206)

The Company’s outstanding stock options have been excluded from the ~~2009~~2010 basic net loss per share calculation as they are anti-dilutive.

e. 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.

f. Income Taxes

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

Net deferred tax liabilities asset consists of the following components as of December 31, 2010 and 2009:


	2010		2009
Deferred tax assets:

Research and Development	$	81,645	$	81,645
NOL Carryover		891,892		857,302
Related Party Accrual		2,615		1,143
		976,152		940,090

Deferred tax liabilities:
Depreciation		(130)		(162)

Valuation allowance		(976,022)		(939,928)
Net deferred tax asset	$	-	$	-

F-17

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, ~~2009~~2010 and ~~2008~~2009

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f. Income Taxes (~~Continued~~continued)

~~Net~~The ~~deferred~~income tax ~~liabilities~~provision ~~asset~~differs ~~consists~~from the amount of income tax determined by applying the ~~following~~U.S. ~~components~~federal asand state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, ~~2009~~2010 and ~~2008~~2009 due to the following:

	2009		2008
	2010		2009
Deferred tax assets:
Book income	$	(129,871)	$	(151,563)
Research and Development	$	81,645	$	81,645
Depreciation		-		(663)
NOL Carryover		857,302		748,530
Stock for services/options expense		87,238		98,569
Accrued Salaries		1,143		6,400
Currency valuation		(3,236)		658
		940,090		836,575
Meals and entertainment		1,833		713
Deferred tax liabilities:
Accrued compensation		2,542		(5,221)
Depreciation		(162)		(100)
Other		4,004		2,939
Valuation allowance		(939,928)		(836,475)
Change in valuation allowance		37,490		54,568
Net deferred tax asset	$	-	$	-
	$	-	$	-

~~The~~At ~~income~~December ~~tax~~31, ~~provision~~2010, ~~differs~~the ~~from~~Company ~~the~~had ~~amount~~net ofoperating ~~income~~loss ~~tax~~carryforwards ~~determined~~of byapproximately ~~applying~~$2,300,000 ~~the~~that ~~U.S.~~may ~~federal~~be ~~and~~offset ~~state~~against ~~income~~future ~~tax~~taxable ~~rates~~income offrom ~~39%~~the toyear ~~pretax~~2011 ~~income~~through ~~from~~2030. No ~~continuing~~tax ~~operations~~benefit ~~for~~has ~~the~~been ~~years~~reported ~~ended~~in the December 31, ~~2009~~2010 ~~and~~consolidated ~~2008~~financial ~~due~~statements tosince the ~~following:~~potential tax benefit is offset by a valuation allowance of the same amount.

	2009		2008
Book Income	$	(151,563)	$	(442,200)
Depreciation		(663)		32
Stock for Services/Options Expense		98,569		378,463
Currency valuation		658		1,798
Meals and Entertainment		713		2,105
Accrued compensation		(5,221)		(9,210)
Other		2,939		-
Change in valuation allowance		54,568		69,012
	$	-	$	-

At December 31, 2009, the Company had net operating loss carryforwards of approximately $2,200,000 that may be offset against future taxable income from the year 2010 through 2029. No tax benefit has been reported in the December 31, 2009 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

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

The Company files income tax returns in the U.S. federal jurisdiction, and the states of California and Nevada. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2007.

Included in the balance at December 31, 2010 and 2009, are no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

g. Development Stage

The Company is considered a development stage Company. 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.

F-18

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, ~~2009~~2010 and ~~2008~~2009

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f. Income Taxes (Continued)

The company had an outstanding tax liability to the state of California for the years ended 2003, 2004, 2005, and 2006. The amount of the liability was $9,864 and was paid during 2008.

Included in the balance at December 31, 2009 and 2008, are no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

g. Development Stage

h. 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 accumulated depreciation are as follows:

	December 31 2009			December 31 2008
	December 31 2010			December 31 2009
Furniture and fixtures	$	2,386	$		2,386
Accumulated depreciation		(1,~~670~~923)			(1,~~192~~670)
Total Fixed Assets	$	~~716~~463	$		~~1,194~~716

Depreciation expense for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, amounted to $~~477~~253 and $~~373~~477,

respectively.

F-19

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

i. Revenue Recognition

Revenue is recognized when the sales amount is determined, shipment of goods to the customer has occurred and collection is reasonably assured. The Company produces a perflurcarbon emulsion under the name PHER-02 that is being readied for pre-clinical and clinical testing for a number of various medical indications.

Newly Adopted Accounting Pronouncements

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

~~In June 2009, the FASB issued guidance under~~ Accounting Standards ~~Codification~~Update (~~“ASC”~~ASU) ~~Topic 105,~~No ~~“Generally~~2010-09 ~~Accepted~~amends ~~Accounting~~Topic ~~Principles”~~855 ~~(SFAS~~“Subsequent ~~No. 168,~~Events” ~~The~~to ~~FASB~~remove ~~Accounting~~the ~~Standards~~requirement ~~Codification~~for TMan ~~and~~SEC ~~the~~filer ~~Hierarchy~~to ofdisclose ~~Generally~~a ~~Accepted~~date ~~Accounting~~through ~~Principles).~~which ~~This~~subsequent ~~guidance~~events ~~establishes~~have ~~the~~been ~~FASB~~evaluated ~~ASC~~in asboth ~~the~~issued ~~single~~and ~~source~~revised offinancial ~~authoritative U~~statements.~~S. GAAP~~ It ~~recognized~~was bydetermined that the ~~FASB~~requirements to bedisclose ~~applied~~the bydate ~~nongovernmental~~that ~~entities.~~the ~~Rules~~financial ~~and~~statements ~~interpretive~~are ~~releases~~issued ofpotentially ~~the~~conflicted ~~SEC~~with ~~under~~some ~~authority~~ of ~~federal~~the ~~securities~~Securities ~~laws~~and ~~are~~Exchange ~~also~~Commission’s ~~sources of authoritative U.S. GAAP for~~ (SEC) ~~registrants~~guidance. The ~~SFAS 168~~amendment ~~and~~is ~~the ASC are~~ effective for ~~financial statements issued for~~ interim ~~and~~or annual periods ending after ~~September~~ June 15, ~~2009~~2010. Certain ~~The~~Revenue ~~ASC~~Arrangements ~~supersedes~~that ~~all~~include ~~existing~~Software ~~non-SEC~~Elements, ~~accounting~~ and ~~reporting~~various ~~standards.~~other ~~All~~ASU’s ~~other~~No. ~~non~~2009-~~grandfathered,~~2 ~~non-SEC~~through ~~accounting~~ASU ~~literature not included in the ASC has become non-authoritative~~No.2010-19 ~~Following~~contain ~~SFAS 168,~~technical ~~the~~corrections ~~FASB~~to ~~will~~existing noguidance ~~longer~~or ~~issue~~affect ~~new~~guidance ~~standards~~to inspecialized ~~the~~industries ~~form~~or ofentities ~~Statements,~~were ~~FSPs,~~recently ~~or EITF Abstracts~~issued. These ~~Instead,~~updates ~~the~~have ~~FASB~~no ~~will~~current ~~issue~~applicability ~~Accounting Standards Updates, which will serve only~~ to ~~update~~ the ~~ASC,~~Company ~~provide~~or ~~background~~their ~~information~~effect ~~about the guidance, and provide the basis for conclusions~~ on the ~~change(s) in the ASC. We adopted ASC 105 effective for our~~ financial statements ~~issued~~would ~~as of September 30, 2009. The adoption of this guidance did~~ not have anbeen ~~impact on our financial statements but will alter the references to accounting literature within the consolidated financial statements~~significant.

InThe ~~May 2009,~~Company ~~the~~has ~~Financial~~reviewed ~~Accounting~~all ~~Standards~~other ~~Board~~recently issued, ~~ASC~~but ~~Topic 855~~not ~~“Subsequent~~yet ~~Events”~~adopted, ~~to incorporate the~~ accounting ~~and~~standards ~~disclosure~~in ~~requirements~~order ~~for~~to ~~subsequent~~determine ~~events~~their ~~into~~effects, ~~U.S.~~if ~~generally~~any, ~~accepted~~on ~~accounting~~its ~~principles~~results ~~with a required adoption date~~ of ~~June 30~~operation, ~~2009.~~financial ~~ASC~~position ~~Topic~~or ~~855~~cash ~~introduces~~flows. Based ~~new~~on ~~terminology,~~that ~~defines a date through which management must evaluate subsequent events~~review, ~~and lists~~ the ~~circumstances~~Company ~~under~~believes ~~which~~that annone ~~entity~~of ~~must~~these ~~recognize~~pronouncements ~~and~~will ~~disclose~~have ~~events~~a orsignificant ~~transactions~~effect ~~occurring~~on ~~after~~its ~~the~~current ~~balance~~or ~~sheet~~future ~~date.~~earnings Weor ~~adopted ASC Topic 855 as of the required effective date~~operations.

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position or cash flowsk. ~~Based~~ Equity ~~on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.~~Securities

~~F-20~~Equity securities issued for services rendered have been accounted for at the fair market value of the securities on the date of issuance.

F-19

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, ~~2009~~2010 and ~~2008~~2009

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

k. 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.

l. Stock Options

The Company measures and records compensation cost relative to employee stock option costs at fair market value based on the fair value of the equity or liability instruments issued.

m. 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. Options and warrants are revalued in situations where they are granted prior to the completion of the performance.

n. 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. From time to time the Company carries cash balances at a single financial institution in excess of the federally insured maximum of $250,000. As of December 31, 2010 and 2009, no cash balances exceeded this limit.

Accounts Receivable

The Company writes off trade receivables when deemed uncollectible. The Company estimates allowance for doubtful accounts based on the aged receivable balances and historical losses. The Company charges off uncollectible accounts when management determines there is no possibility of collecting the related receivable. The Company expensed $0 to bad debt expense for the years ended December 31, 2010 and 2009. The allowance for doubtful accounts balance at December 31, 2010 and 2009, was $0.

NOTE 2 -

RELATED PARTY TRANSACTIONS

Related party payables at December 31, ~~2009~~2010 and ~~2008~~2009 represents amounts owed to officers of the Company for consulting fees and reimbursement of expenses paid of $~~122~~182,~~428~~675 and $38122,~~461~~428, respectively. Interest of 6% ~~and~~ -15% was computed on the balance of the related party payable and recorded either as additional paid in capital or accrued interest.

NOTE 3 -

COMMITMENTS AND CONTINGENCIES

During February 1994, the Company entered into a lease for office space in Pasadena, California. The lease ~~has~~was ~~been~~ extended through October ~~2010~~2011, with monthly rent payments of $861 ~~with annual increases~~.

~~F-21~~During 2010, the Company entered into a lease for office space in Roswell, Georgia. The lease is on a month to month basis, with monthly payments of $900.

Rent expense was $14,736 and $10,641 for the years ended December 31, 2010 and 2009, respectively.

F-20

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, ~~2009~~2010 and ~~2008~~2009

NOTE 3 -

COMMITMENTS AND CONTINGENCIES (continued)

Future minimum lease payments under this non-cancelable operating lease are $8,610 through October 2010.

Rent expense was $10,641 and $14,550 for the years ended December 31, 2009 and 2008, respectively.

Employment Agreements

~~Beginning~~Effective December 31, 2010, the ~~quarter~~Company ~~ended~~resolved ~~September~~to ~~30,~~discontinue ~~2004,~~the employment agreements where the CEO, CFO and Vice President ~~are~~were each entitled to receive 625 shares of common stock of the company which are considered to be restricted securities. They ~~Such~~resolved to provide compensation isfor the prior three years of services and give them each 7,500 shares of common stock as complete compensation for the prior three years of service as directors with no other payments to be ~~paid quarterly~~provided. AsThe value of ~~December~~these ~~31,~~shares ~~2009~~that ~~and~~have ~~2008,~~been aaccrued ~~total~~at ofDecember $231,~~931~~ ~~and~~2010 is $166,~~319~~075. No inshares ~~salaries~~were ~~has~~issued ~~been~~as ~~accrued~~of December 31, ~~respectively~~2010.

NOTE 4 -

EQUITY TRANSACTIONS

During the year ended December 31, ~~2009~~2010 the Company received ~~three~~ subscriptions to purchase a total of 25132,~~000~~500 shares of preferred stock at $1 per share for total proceeds of $25132,~~000~~500. As of year end, no125,000 of these shares have been issued.

During ~~2009,~~ the ~~Company~~year ~~issued~~ended ~~1,000,000~~December ~~shares to LKB Partners~~31, ~~LLC~~2009 ~~for consulting services. Additionally,~~ the Company ~~agreed~~received tothree ~~issue~~subscriptions up to ~~9.5~~purchase ~~percent~~a total of ~~the~~25,000 ~~Company’s outstanding~~ shares of ~~common~~preferred stock at ~~a price of~~ $~~0.10~~1 per share ~~under~~for ~~the~~total ~~terms~~proceeds of ~~a stock option. The option would expire on December 31, 2013. LKB would also receive a monthly fee of~~ $825,000 ~~when, and if, the Company had such funds available to pay to LKB~~. The ~~term~~shares ofwere ~~the~~issued ~~consulting~~in ~~agreement is twenty-four months~~2010.

During the year ended December 31, 2008 the Company completed a one for twenty reverse split of its issued and outstanding shares of common stock. The financial statements have been adjusted to give retroactive recognition of this reverse split. The Company also approved the addition of 10,000,000 shares of preferred stock. No shares of preferred stock have been issued. The Company in 2009, authorized a class of preferred stock entitled 2009 Series A Convertible Preferred Stock with 250,000 shares of preferred stock reserved for issuance under such series. The Series A Convertible Preferred Stock converts into shares of common stock at the rate of 6 2/3 shares of common stock for every one share of preferred stock held. The Series A Convertible Preferred Stock has no voting or dividend preferences.

Also during the year ended December 31, 2008, the Company issued 4,666,667 shares of common stock valued at $280,000. The Company retained an investor relation firm which was paid $20,000 and issued 500,000 shares of our common stock valued at $35,000. The term of the agreement is for one year. The Company also issued 350,000 shares in payment of previously accrued compensation valued at $33,678.

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.

F-22

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 5 -

STOCK OPTIONS AND WARRANTS

AIn ~~summary~~May of2009, the ~~status~~Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock ~~warrants~~at asa price of ~~December~~$0.10 ~~31,~~per ~~2009~~share ~~and~~under ~~2008~~the ~~and~~terms ~~changes~~of ~~during~~a ~~the~~stock ~~years~~option. This ~~then~~equates ~~ended~~to is701,433 ~~presented~~shares ~~below:~~as of December 31, 2010. The option expires on December 31, 2013.

	2009			2008
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding, beginning of year	-	$	-	36,157	$	1.60
Granted	-		-	-		-
Expired/Cancelled	-		-	(36,157)		(1.60)
Exercised	-		-	-		-
Outstanding end of year	-	$	-	-	$	-
Exercisable	-	$	-	-	$	-

A summary of the status of the Company’s outstanding stock options as of December 31, 2010 and December 31, 2009 and changes during the periods then ended is presented below:

In May 2009, we issued 1,000,000 shares to LKB Partners, LLC for consulting services. Additionally, the Company agreed to issue up to 9.5 percent of the Company’s outstanding shares of common stock at a price of $0.10 per share under the terms of a stock option resulting in 701,433 shares. The option would expire on December 31, 2013. LKB would also receive a monthly fee of $8,000 when, and if, the Company had such funds available to pay to LKB. The term of the consulting agreement is twenty-four months.


	2010			2009
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding, beginning of year	701,433	$	0.10	250,000	$	1.20
Granted	-		-	701,433		0.10
Expired/Cancelled	-		-	(250,000)		1.20
Exercised	-		-	-		-

Outstanding end of year	701,433	$	0.10	701,433	$	0.10

Exercisable	701,433	$	0.10	701,433	$	0.10

~~A summary of the status of the Company’s outstanding stock options as of December 31, 2009 and December 31, 2008 and changes during the periods then ended is presented below:~~F-21

	2009			2008
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding, beginning of year	250,000	$	1.20	250,000	$	1.20
Granted	701,433		0.10	-		-
Expired/Cancelled	(250,000)		1.20	-		-
Exercised	-		-	-		-
Outstanding end of year	701,433	$	0.10	250,000	$	1.20
Exercisable	701,433	$	0.10	250,000	$	1.20

F-23

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, ~~2009~~2010 and ~~2008~~2009

NOTE 5 -

STOCK OPTIONS AND WARRANTS (continued)

		Outstanding				Exercisable
Range of Exercise Prices			Number outstanding at December 31, ~~2009~~2010	Weighted Average Remaining Contractual Life	Number Exercisable at December 31, ~~2009~~2010
$	0.~~00-0.~~10		701,433	43	701,433
			701,433		701,433

NOTE 6 -

NOTES PAYABLE

During 2010, the Company entered into a loan agreement with an investor for $27,500. Payments are due according to specific dates noted in the promissory note with interest at a rate of 7% per annum. Interest expense for the year ended December 31, 2010 was $583. The balance on the note at December 31, 2010 is $20,000 and is all current.

During 2009, the Company entered into loan agreements with investors for $9,000. The notes carry an interest rate of 7% and are due on demand. Interest expense for the years ended December 31, 2010 and 2009 was $420 and $630, respectively. The balance on these notes at December 31, 2010 and 2009 is $9,000 and $9,000, respectively.

NOTE 7 -

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 $89,~~815~~148,~~745~~748 at December 31, ~~2009~~2010 which raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. The Company’s management has taken certain steps to maintain its operating and financial requirements in an effort to enable the Company to continue as a going concern until such time that revenues are sufficient to cover expenses, including:

The Company’s management has taken certain steps to maintain its operating and financial requirements in an effort to continue as a going concern until such time as revenues are sufficient to cover expenses. Future plans include a debt or equity offering for between $1,000,000 - $1,500,000 that should enable the Company to complete the 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.

F-22

SANGUINE CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

NOTE 8 -

SUBSEQUENT EVENTS

Subsequent to year end, we the Company has issued 257,~~000~~500 shares of ~~our~~common ~~preferred~~ stock into ~~fulfillment~~each of ~~subscriptions~~the ~~received~~board ~~prior~~members tofor ~~December~~past ~~31, 2009~~services. ~~The~~We ~~sale~~have ~~was~~evaluated ~~for~~subsequent ~~total~~events ~~proceeds~~pursuant ~~of $25,000. The shares were sold~~ to ~~three~~ASC ~~investors. The~~Topic ~~preferred~~855 ~~stock~~and ishave ~~convertible~~determined ~~into~~that 6there ~~2/3~~are ~~shares~~no ofadditional ~~common stock~~events ~~per~~that ~~preferred~~require ~~share~~disclosure. ~~As such the preferred stock is convertible into approximately 166,667 shares of common stock.~~

F-2423

Filing Compare · SANGUINE CORP