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U.S. Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-QSB
 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 Commission file number 0-49764
 SinoFresh HealthCare, Inc.
  Florida
(State or other jurisdiction of
incorporation or organization)
    
    65-1082270
(I.R.S. Employer
Identification Number)
 
 
  þ o




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Table of Contents
 SINOFRESH HEALTHCARE, INC.
 Index
    
    
    
    
    

    PagePart I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheet as of June 30, 2005 (unaudited)
    
    
    
    
    
    
    2Condensed Consolidated Statements of Operations  for the three and six months
ended June 30, 2005 and 2004 (unaudited)
    
    
    
    
    
    
    3Condensed Consolidated Statements of Cash Flows for the six months ended June
30, 2005 and 2004 (unaudited)
    
    
    
    
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    
    
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    
    
    
    
    9Item 3. Controls and Procedures
    
    
    
    
    
    
    14Part II. Other Information
    
    
    
    
    
    
    15Item 1. Legal Proceedings
    
    
    
    
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    
    
    
    
    18Item 6. Exhibits
    
    
    
    
    
    
    18Signatures
    
    
    
    
    
    
    19Certifications
    
    
    
    
    
    
    20Ex-4.1 Thomas Fitzgerald WarrantEx-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32 Section 906 CEO & CFO Certification
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PART I  FINANCIAL STATEMENTS
 
 Item 1. Financial Statements
  
  June 30, 2005(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    172,368Accounts receivable, net of allowances of $60,244
    
    
    160,904Inventory
    
    
    49,403Deferred debt issuance costs, current
    
    
    205,068Other current assets
    
    
    166,258TOTAL CURRENT ASSETS
    
    
    754,001FURNITURE AND EQUIPMENT, NET
    
    
    94,688PATENTS, NET
    
    
    2,403,867GOODWILL
    
    
    2,409,401DEFERRED DEBT ISSUANCE COSTS, NET
    
    
    85,460OTHER ASSETS
    
    
    6,418TOTAL ASSETS
    
    $
    5,753,835LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current portion of capital leases
    
    $
    23,015Short-term notes payable
    
    
    19,874Accounts payable
    
    
    1,666,646Accrued expenses
    
    
    431,682TOTAL CURRENT LIABILITIES
    
    
    2,141,217CONVERTIBLE DEBENTURES, NET OF UNAMORTIZED DEBT DISCOUNTS
    
    
    1,397,919CAPITAL LEASES, NET OF CURRENT MATURITIES
    
    
    49,942TOTAL LIABILITIES
    
    
    3,589,078COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common stock, no par value; 500,000,000 shares authorized; 14,272,120 shares
issued and outstanding
    
    
    5,754,363Preferred stock, no par value; $2 liquidation value per share 200,000,000 shares authorized:Series A convertible preferred stock, voting; 858,170 shares authorized, 823,795
shares issued and outstanding
    
    
    1,647,589Series B convertible preferred stock, voting; 1,500,000 shares authorized, issued
and outstanding
    
    
    3,000,000Series C convertible preferred stock, voting; 1,250,000 shares authorized; 882,000 shares
issued and outstanding
    
    
    1,583,181Accumulated deficit
    
    
    (9,610,929
    )Deferred stock-based compensation
    
    
    (77,447
    )Subscriptions receivable
    
    
    (132,000
    )TOTAL STOCKHOLDERS EQUITY
    
    
    2,164,757TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    5,753,835
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Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004REVENUE, net
    
    $
    832,974
    
    
    $
    183,863
    
    
    $
    1,320,830
    
    
    $
    2,115,432COST OF REVENUE
    
    
    225,014
    
    
    
    81,803
    
    
    
    374,793
    
    
    
    490,359GROSS PROFIT
    
    
    607,960
    
    
    
    102,060
    
    
    
    946,037
    
    
    
    1,625,073OPERATING EXPENSESSalaries and other compensation expense
    
    
    241,489
    
    
    
    312,957
    
    
    
    513,300
    
    
    
    620,437Professional fees
    
    
    192,813
    
    
    
    444,768
    
    
    
    483,542
    
    
    
    841,323Other general and administrative expenses
    
    
    110,723
    
    
    
    156,829
    
    
    
    237,552
    
    
    

    290,453Marketing and advertising expenses
    
    
    385,260
    
    
    
    664,673
    
    
    
    843,913
    
    
    
    973,615Research and development expenses
    
    
    15,476
    
    
    
    173,632
    
    
    
    43,657
    
    
    
    264,249Depreciation and amortization
    
    
    65,448
    
    
    
    65,449
    
    
    
    130,896
    
    
    
    130,801TOTAL OPERATING EXPENSES
    
    
    1,011,209
    
    
    
    1,818,308
    
    
    
    2,252,860
    
    
    
    3,120,878LOSS FROM OPERATIONS
    
    
    (403,249
    )
    
    
    (1,716,248
    )
    
    
    (1,306,823
    )
    
    
    (1,495,805
    )OTHER INCOME (EXPENSE):Interest, net
    
    
    (161,383
    )
    
    
    (12,015
    )
    
    
    (319,212
    )
    
    
    (27,544
    )Other income, net
    
    
    459
    
    
    
    5,000
    
    
    
    2,563
    
    
    
    45,413TOTAL OTHER INCOME (EXPENSE)
    
    
    (160,924
    )
    
    
    (7,015
    )
    
    
    (316,649
    )
    
    
    17,869NET LOSS BEFORE INCOME TAXES
    
    
    (564,173
    )
    
    
    (1,723,263
    )
    
    
    (1,623,472
    )
    
    
    (1,477,936
    )PROVISION FOR INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (564,173
    )
    
    $
    (1,723,263
    )
    
    $
    (1,623,472
    )
    
    $
    (1,477,936
    )NET LOSS
PER COMMON SHAREbasic
    
    $
    (0.04
    )
    
    $
    (0.13
    )
    
    $
    (0.11
    )
    
    $
    (0.11
    )diluted
    
    $
    (0.04
    )
    
    $
    (0.13
    )
    
    $
    (0.11
    )
    
    $
    (0.11
    )WEIGHTED AVERAGE COMMON
SHARES OUTSTANDINGbasic
    
    
    14,259,757
    
    
    
    13,314,323
    
    
    
    14,226,402
    
    
    
    13,313,293diluted
    
    
    14,259,757
    
    
    
    13,314,323
    
    
    
    14,226,402
    
    
    
    13,313,293
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Six Months Ended June 30,2005
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (1,623,472
    )
    
    $
    (1,477,936
    )Adjustments to
 reconcile net loss to net cash provided by (used in) operations:Stock, options and warrants issued for services
    
    
    13,686
    
    
    
    21,875Amortization and depreciation
    
    
    130,896
    
    
    
    130,801Stock issued for settlement cost
    
    
    37,500
    
    
    
    Change in allowance for discounts and returns
    
    
    46,000
    
    
    
    Amortization of debt discount
    
    
    152,502
    
    
    
    Amortization of deferred debt issuance costs
    
    
    102,534
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    22,369
    
    
    
    539,626Inventory
    
    
    (6,279
    )
    
    
    142,369Other current assets
    
    
    176,195
    
    
    
    70,802Other assets
    
    
    
    
    
    
    800Accounts payable
    
    
    (139,390
    )
    
    
    837,657Accrued expenses
    
    
    (58,702
    )
    
    
    (216,359
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    (1,146,161
    )
    
    
    49,635INVESTING ACTIVITIES:Payments for furniture and equipment
    
    
    
    
    
    
    (2,947
    )NET CASH (USED IN) INVESTING ACTIVITIES
    
    
    
    
    
    
    (2,947
    )FINANCING ACTIVITIES:Payments received on warrant subscriptions receivable
    
    
    
    
    
    
    120,000Payments on long-term debt and capital leases
    
    
    (13,895
    )
    
    
    (376,272
    )NET CASH (USED IN) FINANCING ACTIVITIES
    
    
    (13,895
    )
    
    
    (256,272
    )NET DECREASE IN CASH
    
    
    (1,160,056
    )
    
    
    (209,584
    )CASH AND CASH EQUIVALENTS  beginning of period
    
    
    1,332,424
    
    
    
    368,394CASH AND CASH EQUIVALENTS  end of period
    
    $
    172,368
    
    
    $
    158,810SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    74,874
    
    
    $
    57,510NON-CASH ACTIVITY:Conversion of accounts payable to a short term note payable
    
    $
    22,875
    
    
    $
    Warrants issued in connection with a services agreement
increasing other current assets and common stock
    
    $
    18,985
    
    
    $
    
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Note 1.
      5




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Note 2.
      Note 3.
    2005
    
    2004Net loss, as reported
    
    $
    (564,173
    )
    
    $
    (1,723,263
    )Additional stock-based employee compensation costs that would
have been included in the determination of net loss if the
fair value method (SFAS No. 123) had been applied to all awards
    
    
    (42,329
    )
    
    
    (109,815
    )Pro forma net loss, as if the fair value method had
been applied to all awards
    
    $
    (606,502
    )
    
    $
    (1,833,078
    )
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2005
    
    2004Net loss per common share, as reported basic
    
    $
    (0.04
    )
    
    $
    (0.13
    )diluted
    
    $
    (0.04
    )
    
    $
    (0.13
    )Pro forma net loss per common share, as if the fair
value method had been applied to all awardsbasic
    
    $
    (0.04
    )
    
    $
    (0.14
    )diluted
    
    $
    (0.04
    )
    
    $
    (0.14
    )
  2005
    
    2004Net loss, as reported
    
    $
    (1,623,472
    )
    
    $
    (1,477,936
    )Additional stock-based employee compensation costs that would
have been included in the determination of net loss if the
fair value method (SFAS No. 123) had been applied to all awards
    
    
    (82,397
    )
    
    
    (311,463
    )Pro forma net loss, as if the fair value method had
been applied to all awards
    
    $
    (1,705,869
    )
    
    $
    (1,789,399
    )Net loss per common share, as reportedbasic
    
    $
    (0.11
    )
    
    $
    (0.11
    )diluted
    
    $
    (0.11
    )
    
    $
    (0.11
    )Pro forma net loss per common share, as if the fair
value method had been applied to all awardsbasic
    
    $
    (0.12
    )
    
    $
    (0.13
    )diluted
    
    $
    (0.12
    )
    
    $
    (0.13
    )
 Note 4:
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Note 5:
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements and Associated Risks
 THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE
PURSUANT TO THE PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENTS CURRENT EXPECTATIONS, ESTIMATES AND
PROJECTIONS, BELIEFS AND ASSUMPTIONS. WORDS SUCH AS ANTICIPATES, EXPECTS, INTENDS,
PLANS, BELIEVES, SEEKS, ESTIMATES, VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO
PREDICT; THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN ANY
SUCH FORWARD-LOOKING STATEMENTS. THESE RISKS AND UNCERTAINTIES INCLUDE THOSE DISCUSSED IN PART II
- ITEM 6  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS 
RISK FACTORS CONTAINED IN THE COMPANYS FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. UNLESS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO
OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKINGSTATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE. INVESTORS SHOULD REVIEW THIS QUARTERLY REPORT IN
COMBINATION WITH THE COMPANYS ANNUAL REPORT ON FORM 10-KSB IN ORDER TO HAVE A MORE COMPLETE
UNDERSTANDING OF THE PRINCIPAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE COMPANYS STOCK.
 Overview
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Results of Operations
  11




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Inflation and Currency Fluctuation
  Cash and Sources of Liquidity
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Item 3. Controls and Procedures
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Haskins et al. v. Charles Fust et al.
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(1)
    
    The failure to provide proper advice and counsel with regard to the removals of
Messrs. Bannon and Otto as directors;(2)
    
    The failure to recognize and act upon a conflict of interest in representing all
defendants in the lawsuit initially filed February 19, 2004, and;
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(3)
    
    The failure to give proper advice and counsel to the three remaining directors with
regard to supposed Board actions, in particular the removal of Scott Salberg as the
Company auditor.
  Sargon Capital, Inc., a Nevada Corporation, and Andrew M. Badolata vs
Sinofresh Healthcare, Inc., a Delaware Corporation, Charles A. Fust
and John Hallman
  th
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 6. Exhibits.
 ExhibitNumber
    
    Description4.1
    
    Warrant issued to Thomas Fitzgerald, dated May 31, 200531.1
    
    Certifications of CEO pursuant to Section 302 of the Sarbanes-Oxley Act31.2
    
    Certifications of CFO pursuant to Section 302 of the Sarbanes-Oxley Act32
    
    Certifications of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act
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SIGNATURES
  SINOFRESH HEALTHCARE, INC.August 12, 2005
    
    By:
    
    /s/ Charles A. FustCharles A. Fust, Chairman of the Board and Chief ExecutiveOfficer (principal executive officer)August 12, 2005
    
    By:
    
    /s/ Scott M. KleinScott M. Klein, Chief Financial Officer (principalaccounting officer)
 19