**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-KSB**




Annual
      Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934


for
      the
      fiscal year ended December 31, 2005





**0-49764**


(Commission
      File No.)





**SINOFRESH
      HEALTHCARE, INC.**


(Name
      of
      Small Business Issuer in Its Charter)





**FLORIDA**
              (State
                or other jurisdiction of incorporation or organization)
            **65
                - 1082270**
              (I.R.S.
                Employer
              Identification
                No.)





**516
                PAUL MORRIS DRIVE ENGLEWOOD, FLORIDA**
              (Address
                of principal executive offices)
            **34223**
              (Zip
                Code)





Issuer's
      Telephone Number, including area code: (941) 681-3100


Securities
      registered under Section 12(b)


of
      the
      Securities Exchange Act of 1934:


**NONE**





Securities
      registered under Section 12(g)


of
      the
      Securities Exchange Act of 1934:


**COMMON
      STOCK, NO PAR VALUE**





Check
      whether the issuer: (1) 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
      [
      ]





Check
      if
      disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not
      contained herein, and will 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-KSB or any amendment to this Form
      10-KSB.  [ ]




Indicate
      by checkmark whether the registrant is a shell company (as defined in Rule
      12b2 of the Exchange Act). Yes [ ]  No [ ]


Issuer's
      revenues for its most recent fiscal year were $2,939,189.





The
      aggregate market value of the common stock held by non-affiliates computed
      by
      reference to the last sale price of such stock as of February 27, 2006 was
      approximately $2,496,000.





As
      of
      February 27, 2006, there were 15,175,229 shares of the issuer's common stock
      outstanding.


-1-


**Table
      of Contents**




PART
      I


ITEM
      1. DESCRIPTION OF BUSINESS


ITEM
      2. DESCRIPTION OF PROPERTY


ITEM
      3.  LEGAL PROCEEDINGS


ITEM
      4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY
      HOLDERS




PART
      II


ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS


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


ITEM
      7. FINANCIAL STATEMENTS


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


ITEM
      8A. CONTROLS AND PROCEDURES


ITEM
      8B.  OTHER INFORMATION




PART
      III


ITEM
      9. DIRECTORS AND EXECUTIVE OFFICERS


ITEM
      10. EXECUTIVE COMPENSATION


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


ITEM
      12.CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS


ITEM
      13.EXHIBITS
      AND REPORTS ON FORM 8-K


ITEM
      14.PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





-2-


Unless
      otherwise indicated in this Form 10-KSB, "SinoFresh," the "Company" and similar
      terms refer to SinoFresh HealthCare, Inc. and its subsidiary. "SinoFreshTM" is a
      registered trademark of SinoFresh HealthCare, Inc., and the SinoFresh name
      and
      logo are trademarks of the Company.




**DISCLOSURE
      REGARDING FORWARD-LOOKING STATEMENTS**





This
      annual report contains forward-looking statements within the meaning of Section
      21E of the Securities Exchange Act of 1934, as amended, and Section 27A of
      the
      Securities Act of 1933, as amended. When used in this annual report, the words
      "may," "will," "expect," "anticipate," "continue," "estimate," "project" or
      "intend" and similar expressions identify forward-looking statements regarding
      events, conditions and financial trends in connection with the Company's future
      plan of operations, business strategy, operating results and financial position.
      Discussions containing such forward-looking statements may be found in
      "Management's Discussion and Analysis of Financial Condition and Results of
      Operations," "Business" and elsewhere in this report. Current shareholders
      and
      prospective investors are cautioned that any forward-looking statements are
      not
      guarantees of future performance. Such forward-looking statements by their
      nature involve substantial risks and uncertainties, certain of which are beyond
      the Company's control, and actual results for future periods could differ
      materially from those discussed in this annual report, depending on a variety
      of
      important factors, among which are the Company's ability to implement its
      business strategy, its ability to compete with major established companies,
      the
      outcome of litigation, its ability to attract and retain qualified personnel,
      its ability to obtain financing, its ability to continue as a going concern,
      and
      other risks some of which are described under "Risk Factors" and elsewhere
      in
      this report and which may also be described from time to time in future filings
      with the Securities and Exchange Commission. Forward-looking statements
      contained in this report speak only as of the date of this report. Future events
      and actual results could differ materially from the forward-looking statements.
      You should read this report completely and with the understanding that actual
      future results may be materially different from what the Company expects. The
      Company will not update forward-looking statements even though its situation
      may
      change in the future.


-3-


**PART
      I** ****


**ITEM
      1.****DESCRIPTION
      OF BUSINESS******




**Company
      History**




Our
      predecessor, SinoFresh HealthCare, Inc., a Delaware corporation
      ("SinoFresh-Delaware"), was formed on October 15, 2002. It acquired certain
      assets of SinoFresh Laboratories, Inc., an Alabama corporation, effective
      November 15, 2002. In September 2003, we acquired SinoFresh-Delaware by merger
      of SinoFresh-Delaware into our wholly-owned subsidiary, SinoFresh Acquisition
      Corp., a Florida corporation, which is now our operating subsidiary bearing
      the
      name SinoFresh Corporation.




Prior
      to
      our acquisition of SinoFresh-Delaware, we operated as e-Book Network, Inc.
      and
      sold books over the Internet. e-Book was originally a division of e-Miracle,
      Inc. which was incorporated in July 1999 and was an online service provider
      and
      Internet shopping mall developer. Due to under-capitalization and credit
      problems, e-Miracle filed a Chapter 11 Bankruptcy proceeding in the United
      States Bankruptcy Court. We were a division of e-Miracle when e-Miracle filed
      bankruptcy. Subsequently we incorporated as a Florida corporation in accordance
      with the Chapter 11 Plan of Reorganization of e-Miracle.




The
      Company's corporate headquarters are located at 516 Paul Morris Drive,
      Englewood, Florida 34223. Our website address is http://www.sinofresh.com .




**The
      Company and its Business**




OVERVIEW




We
      are a
      pharmaceutical company engaged in the research, development and marketing of
      novel therapies to treat inflammatory and infectious diseases and disorders
      of
      the upper respiratory system. Our principal product is SinoFreshTM Nasal Mist,
      which we market through national drug and food chain stores, mainly Wal-Mart,
      CVS, Osco Drug, Publix Super Markets, Rite Aid, Sav-on Drugs, Duane Reade and
      Walgreens. We are seeking to expand our retail distribution network to include
      the remainder of the chain stores we are already servicing, other national
      food
      and drug chain stores and independent pharmacies. In July 2005, we began selling
      our newest product, SinoFreshTM Daily Throat Spray, through our existing
      distribution network.




Charles
      Fust, the inventor of the SinoFreshTM products, transferred to the Company his
      three U.S. patents issued by the U.S. Patent & Trademark Office for the
      Company's proprietary composition for freshening the nostrils and sinus
      cavities. He has also transferred to the Company various foreign patents and
      patent applications relating to that proprietary composition. The Company also
      has a patent pending on a new proprietary over-the-counter (OTC) product for
      the
      treatment of otitis. Currently, the Company has under development several
      promising new products for upper respiratory disorders and related
      diseases.




-4-


Prior
      to
      June, 2005, the Company's principal product was SinoFreshTM Nasal & Sinus
      Care, which was marketed under the oral monograph system of the U.S. Food and
      Drug Administration (FDA) applicable to certain over-the-counter (OTC) drugs.
      In
      a series of rulemakings begun in 1972, the FDA reviews data on classes of OTC
      drugs and issues final rules in the form of monographs that set out the classes
      and conditions under which an OTC drug may be marketed, without the necessity
      of
      FDA pre-approval. In March 2003, the Company filed a petition requesting the
      FDA
      to reopen the tentative monograph for OTC oral antiseptic health care products
      to allow for submission of additional data that, if accepted and incorporated
      into a final regulation by the FDA, would have allowed an OTC drug to be
      administered nasally, contain the common antiseptic ingredient cetylpyridinium
      chloride (CPC) in certain concentrations, and make claims that the drug was
      an
      "antiseptic." Having petitioned for inclusion in the pending oral antiseptic
      health care monograph, and based upon its understanding of FDA policies
      governing OTC drugs subject to rulemakings that are not final, the Company
      proceeded to market its SinoFreshTM Nasal & Sinus Care product as an OTC oral
      antiseptic drug product (in addition to emphasizing the product's cosmetic,
      cleansing and refreshing benefits).




On
      April
      21, 2005, the FDA issued a letter to the Company denying the Company's petition
      and concluding that it would not include a CPC-containing nasal spray in the
      agency's pending rulemaking for OTC oral antiseptic health care products. As
      a
      result of this action, the Company can no longer make claims in its marketing
      materials or labeling that its nasal spray is an OTC oral antiseptic that
      reduces bacteria and mold in the sinus cavity. The Company has revised its
      marketing materials and labeling and is marketing its nasal spray only as a
      health and beauty aid, focusing on the product's cosmetic, cleansing and
      refreshing benefits. The new product has been reformulated by lowering the
      concentration of the main antiseptic ingredient below the commonly accepted
      drug
      level. Accordingly, we have changed the name of this product to SinoFreshTM Nasal
      Mist.




The
      Company is currently marketing its nasal spray as a health and beauty aid
      product, emphasizing the nasal spray's many non-therapeutic cleansing and
      moisturizing benefits. The Company is also considering changes to the
      ingredients, packaging and marketing of its nasal spray in order to better
      position the product in the market place.




The
      Company is also continuing the New Drug Application (NDA) process for a
      therapeutic nasal spray, requesting the FDA to approve a nasal spray indicated
      for treatment of and/or reduction in the symptoms of certain diseases. In August
      2005, the Company held a meeting with the FDA to discuss an Investigational
      New
      Drug Application (INDA) for a nasal spray - a prerequisite to the conduct of
      the
      clinical investigations necessary to support a NDA. Assuming that the safety
      and
      efficacy of the nasal spray is demonstrated in these clinical studies, the
      Company will seek FDA approval of the nasal spray under an NDA. Conducting
      the
      clinical trials and obtaining FDA approval for any pharmaceutical product
      requires substantial resources (including a substantial amount of additional
      capital) and may take several years. There is no assurance that FDA will approve
      an NDA for the Company's therapeutic nasal spray or any other Company product
      or
      that the Company can obtain sufficient funding to underwrite the cost of
      obtaining FDA approval.




In
      April
      2005 we entered into an agreement with the Lovelace Respiratory Research
      Institute (LRRI) to conduct mammalian-based studies of the anti-infective
      properties of SinoFreshTM Nasal & Sinus Care. The results of these studies
      were very encouraging and will lead into more advanced studies as funding
      becomes available to the Company. The new agreement was prompted by preliminary
      in-vitro study results demonstrating strong evidence that this product can
      reduce the infectivity of common respiratory viruses including adenovirus and
      respiratory syncytial virus (RSV). Our original collaboration with LRRI,
      initiated in May of 2004, was designed to assess the virucidal properties of
      SinoFreshTM. Viruses are widely recognized as the most frequent cause of acute
      respiratory infections and are a leading cause of child mortality
      worldwide.




-5-


PRODUCTS




*Non-Ethical
      Pharmaceutical Products*




SinoFreshTM
      Nasal Mist is the Company’s principal product. This product is a nasal spray
      formulated to kill mold, bacteria and certain viruses that reside in the nose
      and sinus passages, and to remove dust, pollen and other irritants. It is
      currently classified as a health and beauty aid. The key ingredient is
      cetylpyridinium chloride (CPC), a surface-active antiseptic. CPC is a common
      ingredient in over-the-counter oral hygiene products and has a safety and
      efficacy history of over 50 years. SinoFreshTM Nasal Mist generally retails
      between $13.49 and $15.99 before rebates for a 1-fluid ounce bottle
      (approximately a 30-day supply).




SinoFreshTM
      Daily Throat Spray is an over-the-counter antiseptic product formulated to
      kill
      bacteria and other pathogens colonizing in the mouth and back of the throat.
      This formulation also includes CPC. Daily use is encouraged in order to
      eliminate pathogens that can lead to infection and illness and prevent them
      from
      re-colonizing in the throat. The product may also be used at the first sign
      of a
      sore throat in order to thwart further spread of an infection. Like our nasal
      spray, Daily Throat Spray is recommended especially for people who are
      frequently in crowded, poorly ventilated environments such as airplanes, schools
      and offices where airborne organisms easily spread from one person to another.
      The Daily Throat Spray formula is augmented with xylitol, a natural
      antibacterial ingredient, and mint flavors that cool and freshen the breath
      while it protects the oral-throat cavity. SinoFreshTM Daily Throat Spray comes in
      a 2-fluid ounce bottle. When used twice daily as directed, one bottle lasts
      approximately 3-4 weeks. The suggested retail price per bottle is
      $9.99.




*Ethical
      Pharmaceutical Products*




The
      Company is currently in development with a nasal spray product (preliminarily
      called "Rhinox") for the treatment of chronic rhinosinusitis ("CRS"). The
      Company is seeking funding in order to continue with clinical
      studies. **** Assuming
      the efficacy of the Company's clinical studies, management would seek FDA
      approval of the new product as an NDA. The Company may develop new drugs in
      the
      prescription drug category. Obtaining FDA regulatory approval for these
      pharmaceutical products will require substantial resources and may take several
      years. The length of this process will depend upon the method of administration,
      pharmaceutical complexity, novelty of the product, the nature of the disease
      or
      ailment, and the indications to be treated. If the Company is not granted
      regulatory approval for these new products in a timely manner, or if the patents
      sought are not granted, or if the patents granted are subsequently challenged,
      these events could have a material effect on the business and financial
      conditions of the Company.




RESEARCH
      AND DEVELOPMENT




Research
      and development activities are identified and planned by in-house staff members.
      Because of limited personnel and facility resources, the Company relies
      primarily on external sources for conducting its research and development
      activities. Research and development costs for the years ended December 31,
      2005
      and 2004 were approximately $181,000 and $236,000, respectively. The Company
      has
      a pipeline of several new products based on its current product platform.
      Assuming that the Company can obtain sufficient financing or other support,
      the
      Company plans to establish the protocols and file an INDA with the FDA geared
      toward the use of antiseptic therapies in the upper respiratory system and
      to
      undertake the clinical studies necessary for the FDA approval of a nasal spray
      product for the prescription drug market. Additionally, extensive clinical
      and
      developmental testing is anticipated in connection with the Company's
      development of other new ethical drug products related to the treatment of
      various upper respiratory disorders and related diseases. Many of these new
      products are expected to lead to applications for new patents in the United
      States as well as abroad. The Company is pursuing partnering and collaborative
      arrangements with several additional prominent organizations. These such
      arrangements are being sought in order to further enhance the Company's research
      and development activity.




-6-


REGULATORY
      MATTERS




The
      Company's business is subject to federal and state laws and regulations adopted
      for the health and safety of consumers and users of its products. The Company's
      SinoFreshTM Nasal Mist and SinoFreshTM Daily Throat Spray products are subject to
      regulation by various federal, state and foreign agencies, and the Company
      is
      subject to regulatory and legislative changes that can affect the economics
      of
      both the Company and the industry by requiring changes in operating practices
      and protocols or by influencing the demand for, and the costs of, production
      and
      distribution of SinoFreshTM products. Management believes that the Company is in
      compliance with all applicable laws, regulations and standards currently in
      effect, including the Food, Drug and Cosmetics Act of 1938 and amendments
      thereto. Although it is possible that the future results of operations could
      be
      affected by the future costs of compliance, the Company's management believes
      that future costs of compliance will not have a material adverse effect on
      either the Company's financial position or competitive position.




The
      costs
      and length of time required to develop and obtain regulatory (and patent)
      approval for future products and extensions of current products are subject
      to
      several uncertainties and risks, among them, legal, administrative and
      regulatory risks, inflation, market conditions, consumer demand, and the
      Company's ability to protect its patents against infringement and its products
      against duplication by others.




FDA
      CLASSIFICATION OF DRUG PRODUCTS




Products
      that are labeled and marketed as drug products are approved and regulated by
      the
      FDA. Implied in this registration is the adherence to very strict quality
      standards known as current Good Manufacturing Practices, which govern the
      manufacture of these products.




Entry
      into this category of drugs is usually accomplished by one of two routes. The
      first and least burdensome process is through the OTC drug monograph system,
      which is based on a pharmacology/physiology category. This allows the Company
      to
      make only claims related to the pharmacology of the active ingredients.
      Currently, SinoFreshTM Daily Throat Spray is encompassed in the monograph system
      which provides regulatory cover for marketing the product.




The
      next
      and more arduous process is the NDA system, which is based on the
      treatment/prevention of a disease or condition. This allows the Company to
      make
      treatment or prevention claims related to a disease or condition. Also required
      for this process is the successful completion of two controlled clinical
      studies.




PATENTS
      AND TRADEMARKS




The
      Company currently owns three U.S. patents under which it has the exclusive
      right
      to manufacture, market and distribute in the United States a proprietary
      composition for freshening the nostrils and sinus cavities. United States Patent
      No. 5,785,988 (issued July 28, 1998) pertains to a composition for freshening
      the nostrils and sinus cavities; Patent No. 6,083,525 (issued July 4, 2000)
      pertains to a composition for freshening sinus cavities and includes a carrier
      for a masking agent that conceals and eliminates odors emanating from the sinus
      cavities, and also includes an anti-septic or anti-infective constituent; and
      Patent No. 6,344,210 (issued February 5, 2002) is a continuation-in-part patent
      related to the freshening of the sinus cavities. All three patents were issued
      to Charles Fust, the principal of SinoFresh Laboratories, Inc., who subsequently
      assigned them to the Company. All of the assignments have been recorded and
      filed with the United States Patent and Trademark Office.


-7-




The
      Company has patents or patent applications pending for the Company's proprietary
      composition in Canada and various other foreign countries located in Europe,
      Eastern Europe, Asia, Latin America and the Middle East. The strength of the
      Company's patent position is important to the long-term success of the Company.
      There can be no assurance that these patents and the patent applications made
      in
      the United States and abroad will effectively protect the Company's products
      from infringement or from duplication by others.




The
      Company currently has trademark rights and/or trademark registrations on the
      "SINO-FRESH" and "SinoFresh" names in the United States and several foreign
      countries. The Company is currently in the process of registering these
      trademarks in 61countries that are parties to the Madrid Protocol.




PRODUCT
      DISTRIBUTION AND CUSTOMERS




The
      Company's products are marketed and sold through various brokers, distributors
      and independent sales representatives. The Company pays commissions based on
      sales volumes.




The
      Company's products are retailed through numerous food and chain drug stores
      throughout the United States, including Wal-Mart, CVS, Osco Drug, Publix Super
      Markets, Rite Aid, Sav-on Drugs, Duane Reade and Walgreens. The Company plans
      to
      continue expanding its retail distribution network to other food and drug chain
      stores and independent pharmacies as well as the chain stores the Company is
      currently servicing. In addition, the Company is exploring the possibilities
      of
      developing alliances with other entities for the purpose of manufacturing,
      distributing, marketing and regulatory compliance of its products in certain
      foreign countries.




The
      Company's primary customers in 2005 were Wal-Mart, Walgreens, CVS, and Rite
      Aid
      which accounted for more than 72% of the Company's annual gross sales volume
      in
      2005. The Company had four customers that accounted for over 92% of net accounts
      receivable at December 31, 2005. The loss of any one of these customers could
      adversely impact the Company's revenue.




COMPETITION




There
      are
      a variety of competitors in both the OTC and Rx marketplace for SinoFreshTM Nasal
      Mist and Daily Throat Sprays. Generally, our competitors can be segmented into
      three types:


·  large,
      well-resourced pharmaceutical companies with established prescription brands
      such as GlaxoSmithkline (Flonase) and Pfizer (Zithromax);


·  small
      to
      mid-size companies with an OTC focus such as Matrixx Initiatives (Zicam brand),
      BF Ascher (Ayr brand), Prestige Brands (Chloraseptic), and Combe, Inc. (Cepacol
      brand); and


·  large
      pharmaceutical companies with an OTC focus such as Schering-Plough (Afrin &
Claritin), Bristol Myers (4-Way Nasal Spray), and Wyeth (Alavert).





Our
      nasal
      spray also competes in the OTC and Rx markets. Competitive therapies for
      nasal-sinus ailments primarily provide symptomatic relief without addressing
      underlying causes of the condition. Additionally, nasal-sinus symptoms can
      have
      several origins (e.g. bacterial infection, viral infection, allergens, mold,
      other airborne contaminants) but very similar outward signs which has led to
      misdiagnosis by the medical community as well as confusion among self-medicating
      consumers. The result of these dynamics is a variety of nasal therapies
      competing for both the acute and chronic sinus sufferer. Examples of products
      in
      the OTC market that compete with our nasal spray are decongestant nasal sprays
      (Afrin, Dristan, 4-Way), saline nasal rinses (Ocean, Ayr), homeopathic remedies
      (Zicam), antihistamines (Claritin, Alavert), and decongestant tablets.


-8-





In
      the Rx
      market, our nasal spray primarily competes with nasal corticosteroids and
      antibiotics/antibacterials manufactured and marketed by large pharmaceutical
      companies. Nasal corticosteroids are formulated to shrink sinus inflammation
      and
      include brands such as Flonase, Nasonex, and RhinocortAQ.
      Antibiotics/antibacterials are intended to eliminate bacterial organisms and
      include brands such as Zithromax, Augmentin, and Bactroban.





At
      first
      glance the competitive landscape appears crowded, in particular for our nasal
      spray. However, we believe that the versatility of our product should enable
      us
      to effectively gain share across many product segments. SinoFreshTM Nasal Mist is
      an effective nasal cleanser and moisturizer in competition with saline rinses,
      and rinses away allergens, which can help eliminate the need for antihistamines.
      SinoFresh also targets the underlying causes of chronic sinus ailments, such
      as
      mold, bacteria and viruses. Chronic sufferers are most likely to use OTC
      products such as decongestant nasal sprays, or to receive prescriptions from
      their physician for corticosteroids and antibiotics.




EMPLOYEES




As
      of
      February 28, 2006, the Company had ten (10) full-time employees. None of the
      Company's employees are subject to collective bargaining agreements. The Company
      periodically engages independent contractors to fulfill certain sales, marketing
      and business development needs.




SUPPLIERS




The
      Company has qualified two third-party (contract) manufacturers, both of which
      are FDA approved manufacturing facilities, to manufacture its products. The
      Company believes that either of these manufacturers is capable of sustaining
      and
      providing its production needs.




Raw
      materials used in the production of the SinoFreshTM Nasal Mist and SinoFreshTM
Daily Throat Spray are readily available from numerous sources. Currently,
      these
      raw materials are being procured from two main vendors in order to secure
      purchasing economies of scale. Should any vendor be unable or unwilling to
      supply the Company's manufacturer with an ingredient, other sources have been
      identified. However, any situation where the vendor is not able to supply the
      contract manufacturer with the ingredients may result in a temporary delay
      in
      production until replacement supplies are obtained to meet the Company's
      production requirements.




SALES
      AND
      MARKETING




SinoFresh
      is aided in its sales and marketing efforts through various individual broker
      arrangements which provide the Company with sales support in retail accounts
      throughout the United States and Canada. The Company pays these brokers a
      percentage of net revenue attributable to their sales. Management believes
      that
      these arrangements are cost-effective and, as such, saves valuable resources
      that can otherwise be expended in its marketing and product branding efforts.
      In
      September 2005, the Company terminated its existing agreement with its Master
      Broker. Since that time, the Company has entered into individual brokerage
      agreements with brokers directly involved with the marketing of the Company's
      products. The Company believes that the termination of its Master Broker
      Agreement will result in lower sales and marketing costs because the fees
      payable to the individual brokers are less than the combined fees paid to the
      Master Broker.


-9-




The
      Company anticipates that drug stores will continue to provide a significant
      portion of its revenue from product sales. We are focusing our sales efforts
      on
      the large chain drugstore companies. Small local pharmacies are generally
      serviced through large national independent distributors. There are more than
      45,000 pharmacies in the United States of which approximately 25,000 are
      independent. Large grocery store chains are also targeted as they account for
      more than 7,000 outlets. The Company estimates that its products are available
      in more than 20,000 retail outlets.




SinoFresh
      is currently exploring the possibility of launching the SinoFreshTM brand in
      markets in Europe, Asia and elsewhere around the world through licensing
      arrangements with joint ventures or partnerships.




**ITEM
      2.****DESCRIPTION
      OF PROPERTY******




The
      Company's executive offices are located at 516 Paul Morris Drive, Englewood,
      Florida 34223. This facility consists of approximately 10,000 square feet of
      office and warehouse space. The Company leases the facility from an entity
      owned
      by Charles Fust, the principal shareholder and an officer and director of the
      Company. Base lease payments are $5,998 per month, plus sales tax. The lease
      has
      a five-year term which expires in April 2008, and may be renewed for two
      additional terms of five years each. In addition, the Company is responsible
      for
      payment of real estate taxes on the property, association maintenance fees
      and
      assessments, insurance, and all non-exterior maintenance and repairs on the
      property. The Company believes that the existing facility is adequate to meet
      its current and anticipated needs.




**ITEM
      3.****LEGAL
      PROCEEDINGS******




Hawkins
      et al. v. Charles Fust et al.





On
      February 20, 2004, a law suit was filed in the U.S. District Court, Middle
      District of Florida, Ft. Myers Division, Case No. 04-CV-95-FTM-29 SPC, styled
      Hawkins, et al. vs. Charles Fust, et al., and an amended complaint was filed
      on
      March 3, 2004 which merely changed allegations directed toward the location
      where the action may be heard and noted that SinoFresh is a Florida corporation.
      This legal proceeding was moved to the U.S. District Court located in Tampa,
      Florida. The plaintiffs include Stephen Bannon and David Otto, directors of
      SinoFresh, as well as other purported shareholders of SinoFresh. The defendants
      are Charles Fust, Stacey Maloney -Fust, P. Robert DuPont, Russell R. Lee, III
      (the company's former CFO), and SinoFresh HealthCare, Inc. The complaint
      asserted claims based on federal securities law violations and breach of
      fiduciary duty.




In
      December 2005, the parties to the complaints entered into two settlement
      agreements resolving all outstanding issues in the litigation. The first
      settlement agreement was entered into among all of the plaintiffs and defendants
      and contained the following principal provisions: (i) the forgiveness by the
      law
      firm of Greenberg Traurig P.A of all outstanding legal fees owed by the Company
      to Greenberg Traurig (which fees are estimated to be of approximately $240,000),
      (ii) the payment of $200,000 by Greenberg Traurig to the Company, (iii) the
      Company's issuance of 37,500 shares of common stock to certain of the
      plaintiffs, and (iv) the release of all claims between the parties to the
      litigation.


-10-




The
      second settlement agreement was entered into between Company and the law firm
      of
      David B. Haber, P.A. ("Haber"), the counsel for certain of the plaintiffs.
      The
      Haber Settlement Agreement contains the following principal provisions: (i)
      the
      payment of $25,000 by the Company to Haber, (ii) the Company's issuance of
      120,000 shares of common stock to Haber, (iii) the Company's issuance to Haber
      of options to purchase 40,000 shares of common stock (which options can be
      exercised immediately at an exercise price of $0.25 per share), and (iv) the
      release of claims of the plaintiffs and Haber against the Company for
      reimbursement of legal fees.




**Other
      Matters**




From
      time
      to time, the Company is a party to other litigation or proceedings in connection
      with its business, as either a plaintiff or defendant. There are no such pending
      legal proceedings to which the Company is a party that, in the opinion of
      management, is likely to have a material adverse effect on the Company's
      business, financial condition or results of operations.




**ITEM
      4.****SUBMISSION
      OF MATTERS TO A VOTE BY SECURITY HOLDERS******




Not
      applicable.




-11-




**PART
      II******


**ITEM
                5.**
            **MARKET
                FOR COMMON EQUITY****AND RELATED STOCKHOLDER
                MATTERS**




**Market
      Information**




Our
      common stock is traded in the over-the-counter market and is quoted on the
      OTC
      Electronic Bulletin Board under the symbol "SFSH.OB." The following table
      represents the range of the high and the low closing bid prices, as quoted
      on
      the OTCBB, for each calendar quarter during the last two fiscal years. These
      quotations represent prices between dealers, may not include retail mark-ups,
      markdowns or commissions, and may not necessarily represent actual transactions.




**Fiscal
                Quarter Ended**
            **Low**
            **High**December
                31, 2005
              September
                30, 2005
              June
                30, 2005
              March
                31, 2005
              
              December
                31, 2004
              September
                30, 2004
            $0.20
              $0.13
              $0.13
              $0.30
              
              $0.55
              $0.55
            $0.35
              $0.54
              $0.51
              $0.77
              
              $1.00
              $1.01June
                30, 2004
            $0.85
            $1.80March
                31, 2004
            $0.78
            $2.25




There
      are
      approximately 711 shareholders of the Company's common stock as of February
      27,
      2006.




**Dividends
      and Dividend Policy**




The
      Company has not paid any cash dividends on its common or preferred stock during
      the last two fiscal years, and it does not anticipate paying any cash dividends
      in the foreseeable future. The Company currently intends to retain any future
      earnings for reinvestment in its business. Any future determination to pay
      cash
      dividends will be at the discretion of the Board of Directors and will be
      dependent on the Company's financial condition, results of operations, capital
      requirements and other relevant factors.


-12-


**Equity
      Compensation Plan Information**




The
      following table sets forth information about the Company's equity compensation
      plans, including the Company's 2002 Stock Option Plan (the Plan) and non-plan
      equity compensation agreements as of December 31, 2005.




**Number
                of Securities to**
            
            **Number
                of Securities****be
                Issued Upon**
            **Weighted-Average**
            **Remaining
                Available****Exercise
                of**
            **Exercise
                Price of**
            **For
                Future Issuance****Outstanding
                Options,**
            **Outstanding
                Options,**
            **Under
                Equity****Plan
                Category**
            **Warrants
                and Rights**
            **Warrants
                and Rights**
            **Compensation
                Plans**Equity
                Compensation Plans Approved By Shareholders
            1,528,750
            (1)
            $0.92
            1,471,250
            (2)Equity
                Compensation Plans Not Approved by Shareholders
            3,827,771
            (3)
            $1.51
            N/ATotal
            5,356,521
            
            $1.35
            1,471,250





_____________________


(1) Represents shares subject to outstanding options under the Plan.


(2) Represents shares available for option grants under the Plan.


(3) Represents non-plan options and warrants.





Charles
      Fust is employed as the Company's Chief Executive Officer under an employment
      agreement dated December 1, 2002. The employment agreement provides, among
      other
      things, that the Company and Mr. Fust enter into a stock option agreement under
      which he would be provided anti-dilution rights so that Mr. Fust's equity
      ownership of the Company, on a fully diluted basis, will be no less than 15%
      so
      long as the total outstanding shares on a fully diluted basis are less than
      100,000,000.




The
      Company has an employment agreement with Scott M. Klein, the Chief Financial
      Officer and Secretary, which provides, among other things, that Mr. Klein will
      be granted a 5-year option for 50,000 shares on November 1, 2006, at an exercise
      price that is the closing sale price of the Company's common stock on that
      date,
      and will vest ratably over three years commencing on the date of
      grant.


-13-


*Equity
      Compensation Plans Not Approved by Shareholders*




In
      2005,
      a total of 120,000 non-plan options to purchase common shares were granted
      to
      three independent consultants with vesting periods ranging from immediate to
      one
      year. The options have five-year terms and exercise prices ranging from $0.60
      per share to $1.00 per share. In addition, the Company re-priced 27,500 non-plan
      options originally issued in 2003 to an entity which provided marketing related
      services to the Company. The original exercise price of the options was $1.00
      per share and has now been reduced to $0.55 per share.




The
      Company issued warrants to two service providers in fiscal 2005 for a total
      of
      112,000 shares of common stock, with exercise price ranging from $0.55 per
      share
      to $1.00 per share. The first warrant for 100,000 shares has a term of two
      years
      and immediate vesting at an exercise price of $1.00 per share and the other
      warrant for 12,000 shares has a term of five years and vests immediately at
      an
      exercise price of $0.55 per share. Both warrants contain registration rights.
      In
      addition, 1,107,025 warrants were either cancelled or expired during
      2005.




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




The
      following information and analysis of SinoFresh's financial condition and
      results of operations for the fiscal years ended December 31, 2005 and December
      31, 2004 should be read in conjunction with the consolidated financial
      statements of SinoFresh and the notes thereto appearing elsewhere in this
      report. Statements in this section and elsewhere in this report that are not
      statements of historical or current fact constitute "forward-looking
      statements." Such statements are subject to certain risks and uncertainties,
      which could cause results to differ materially from those projected, including,
      but not limited to, those set forth below under "Risk Factors" and elsewhere
      in
      this report.




**Summary
      Financial Information**





The
      following table provides selected consolidated financial and operating data
      for
      the years ended December 31, 2005 and 2004.




**Statement
      of Operations Data**


**Year
                  Ended**
                **December
                  31,****2005**
              
              **Year
                  Ended**
                **December
                  31, 2004**Revenue,
                  net
              
              $
              2,939,189
              
              $
              3,564,514Gross
                  Profit
              
              
              2,064,575
              
              
              2,621,891Loss
                  From Operations
              
              
              (1,543,564
              )
              
              (2,448,651
              )Net
                  Loss
              
              
              (1,833,508
              )
              
              (3,706,280
              )


-14-




**Balance
      Sheet Data**


**December
                  31****2005**
              
              
              **2004**Current
                  Assets
              
              $
              728,394
              
              $
              2,133,357Current
                  Liabilities
              
              
              3,543,407
              
              
              2,341,486Total
                  Assets
              
              
              5,689,576
              
              
              7,366,621Long
                  Term Debt
              
              
              37,915
              
              
              1,307,077Stockholders'
                  Equity
              
              
              2,108,254
              
              
              3,718,058




*Results
      of Operations*




Revenues
      for 2005 were $2,939,189 representing a decrease of $625,325 from Revenues
      from
      2004. There are two primary reasons for the overall decrease. First, the Company
      expended substantial amounts on advertising in the fourth quarter of 2003 and
      continued to sustain these efforts throughout the first half of 2004. In
      contrast, advertising in 2005 was less overall and was concentrated primarily
      in
      late first quarter through the end of second quarter due to cash constraints.
      Second, revenues in 2004 were substantially increased due to the recognition
      of
      approximately $800,000 in pay to scan type sales. Shipments for these products
      took place primarily in the last quarter of 2003, but a sales recognition
      process was not completed until 2004. We are no longer subject to these
      contingent sales arrangements. These factors were partially offset by more
      widespread distribution of our nasal spray and the commencement of shipments
      of
      our throat spray in July, 2005.





Gross
      profit for 2005 was $2,064,575 (70%), compared to $2,621,891 (74%) for 2004.
      The
      decrease in the gross margin is primarily due to returns of damaged and expired
      product from certain retailers.





Salaries
      and related expenses decreased $241,915, from $1,401,419 to $1,159,504 for
      the
      years ended December 31, 2004 and 2005, respectively. This decrease was a result
      of specific reductions in personnel occurring in the latter part of 2004 through
      the first half of 2005. The Company made these reductions in order to streamline
      its organization and to reduce administrative costs.




Professional
      fees decreased $881,972, from $1,465,294 to $583,322 for the years ended
      December 31, 2004 and 2005, respectively. The decrease was a result of a
      reversal of $183,000 in accrued consulting fees which had been subject to
      litigation. The Company eliminated this accrual in the third quarter of 2005,
      after the claims of the consultant were dismissed. The decrease was also due
      to
      the termination of certain consulting arrangements (which occurred in the later
      part of 2004), and lower legal fees (due to substantially resolving certain
      legal proceedings during 2005). Accounting fees were higher in 2004 as of a
      result of the termination of the Company's former accountants in the first
      quarter of 2004, and the engagement of new accountants. This change resulted
      in
      a duplication of fees as well as additional costs typically involved on first
      year engagements. Finally, accounting and legal fees were higher in 2004 as
      a
      result of a Form SB-2 filing required as part of the 2004 debenture
      agreement.


-15-




Other
      general and administrative expenses decreased $113,264 from $567,913 to $454,649
      for the years ended December 31, 2004 and 2005, respectively. The decrease
      was
      primarily due to the Company's efforts to streamline its organization and to
      reduce administrative costs.





Marketing
      and advertising expenses decreased $169,890 from $1,137,832 to $967,942 for
      the
      years ended December 31, 2004 and 2005, respectively. The Company conducted
      an
      extensive marketing campaign during the first half of 2004 and again in the
      first half of 2005 after raising capital in late 2004 through a debenture
      offering. In the second half of both years, marketing and advertising activities
      were curtailed due to the lack of working capital.





Research
      and development expenditures reflect the costs associated with basic research,
      product development, clinical testing, regulatory compliance, product
      enhancement and the development of new products related and unrelated to our
      current product line. Research and development costs were down $55,466 from
      $236,387 to $180,921 for the years ended December 31, 2004 and 2005,
      respectively. The Company's research and development activities for 2005 have
      been limited due to the lack of financial resources.





Depreciation
      and amortization totaled $261,697 and $261,801 for the years ended December
      31,
      2004 and 2005, respectively. These expenses principally consist of amortization
      of patent costs.





Total
      net
      interest expense was $661,532 in 2005 compared to $1,303,380 in 2004. The
      decrease of $641,848 is primarily related to certain one time costs associated
      with the issuance of convertible debentures in the fourth quarter of 2004.
      There
      is still approximately $442,000 in costs associated with this financing that
      will be amortized over the next 11 months.





Total
      other income was $371,588 in 2005 compared to $45,751 in 2004. The 2005 total
      is
      primarily related to amounts received by the Company from the settlement of
      the
      Hawkins litigation which is more fully described in Item 3 to this Form 10-KSB..
      The 2004 amount primarily reflects the proceeds from sale of certain assets.





As
      a
      result of the factors discussed above, SinoFresh had a net loss of $1,833,508
      ($0.13 per share) compared to a net loss of $3,706,280 ($0.28 per share) for
      the
      years ended December 31, 2005 and 2004, respectively.





As
      of
      December 31, 2005, SinoFresh had total assets of $5.7 million, liabilities
      of
      $3.6 million and stockholders' equity of $2.1 million. Working capital deficit
      totaled approximately $2,800,000 as of December 31, 2005.





*Taxes*




At
      December 31, 2005, SinoFresh had a net operating loss carry forward (NOL) for
      federal income tax purposes of approximately $10 million. The NOL expires at
      various dates through the year 2025. Utilization of SinoFresh's net operating
      loss may be limited in the event of significant changes in ownership of
      Sinofresh under the regulations of the Internal Revenue Code.




-16-


*Inflation
      and Currency Fluctuation*




Inflation
      and currency fluctuations have not previously had a material impact upon the
      results of operations and are not expected to have a material impact in the
      near
      future.




*Cash
      and Sources of Liquidity*




The
      Company historically has satisfied its operating cash requirements primarily
      through cash flow from operations, from borrowings and from trade and equity
      financings. At December 31, 2005, the Company had approximately $148,000 in
      cash
      on hand and approximately $274,000 in net accounts receivable.




In
      December 2004, we issued $1,830,000 of senior secured 6% convertible debentures
      which have a maturity date of December 5, 2006. The debentures are convertible
      at the option of the holders into 3,327,273 shares of common stock at a
      conversion price of $0.55 per share. The debentures contain anti-dilution
      provisions under which the number of shares issuable upon conversion of the
      debentures and the conversion price will be adjusted upon the sale by us of
      common stock or securities convertible into common stock at prices below the
      then existing conversion price of the debenture, the occurrence of stock splits,
      stock distributions, and other corporate events. We may, at our option, require
      the conversion of all of the debentures into shares of common stock provided
      that the market price of our common stock exceeds 300% of the conversion price
      of the debentures then in effect for at least 20 consecutive trading days.
      During 2005, the holders of debentures with a principal balance of $100,000
      converted these debentures into 181,816 shares of common stock.




On
      December 31, 2005, the Company had current assets of approximately $728,394,
      including cash and cash equivalents of approximately $148,037 and current
      liabilities of $3,543,407. As a result, the Company's current liquidity is
      extremely limited and the Company will require a significant amount of
      additional working capital in order to meet its working capital requirements
      and
      implement its business plan. In order to address these issues, the Company
      is
      seeking to raise additional working capital through the issuance of debt and
      equity securities. The Company is also seeking to enter into strategic alliances
      with third parties to support its research and development activities and the
      marketing of its products. Although the Company believes that it will be able
      to
      obtain additional working capital and financial support, there can be no
      assurance that the Company's efforts will be successful.




*Critical
      Accounting Policies*




Revenue
      Recognition :
      The
      Company recognizes revenue on its products in accordance with the Securities
      Exchange Commission (SEC) Staff Accounting Bulletin No. 101, "Revenue
      Recognition in Financial Statements." Under these guidelines, SinoFresh defers
      revenue recognition on transactions if any of the following existed: persuasive
      evidence of an arrangement did not exist, title had not transferred, product
      payment was contingent, the price was not fixed or determinable, or payment
      was
      not reasonably assured. The Company accrues a provision for estimated returns
      concurrent with revenue recognition.




SinoFresh
      has adopted Emerging Issues Task Force Issue 01-9, "Accounting for Consideration
      Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)"
      (EITF 01-9), which became effective for fiscal years beginning after December
      15, 2001. Management has concluded that EITF 01-9 is applicable to the
      accounting for its cooperative agreements with certain customers, as the
      benefits received from consideration given to those customers are not
      sufficiently separable from the revenue derived. Accordingly, all such
      cooperative expenses are recorded as reductions to revenues.




-17-


Asset
      Impairments :
      The
      Company has adopted Statement of Financial Accounting Standards No. 141,
      "Business Combinations," (FAS 141) and Statement of Accounting Standards No.
      142, "Goodwill and Other Intangible Assets" (FAS 142). FAS 141 requires business
      combinations completed after June 30, 2001 to be accounted for using the
      purchase method of accounting. It also specifies the types of acquired
      intangible assets that are required to be recognized and reported separately
      from goodwill. Under FAS 142, goodwill and other intangible assets (with
      indefinite lives) will not be amortized but will be tested for impairment at
      least annually. The Company completed its transitional impairment test of
      existing goodwill and patents as of December 31, 2005. This test was performed
      internally and consisted of evaluating potential future revenue streams that
      could realistically be realized as a result of the goodwill and patents of
      the
      Company. It was determined by this test that these future revenue streams
      support the values previously assigned to these assets. Therefore, no impairment
      losses were deemed to have occurred based on these tests.




*Recent
      Accounting Pronouncements*




In
      March
      2004, the Financial Accounting Standards Board (FASB) approved the consensus
      reached on the emerging Issues Task Force Issue No. 03-1 (EITF 03-1), "The
      Meaning of Other-Than Temporary Impairment and Its Application to Certain
      Investments." The objective of EITF 03-1 is to provide guidance for identifying
      other-than-temporarily impaired investments. EITF 03-1 also provides new
      disclosure requirements for investments that are deemed to be temporarily
      impaired. In September 2004, FASB issued a FASB Staff Position (FSP) EITF 03-1-1
      that delays the effective date of the measurement and recognition guidance
      in
      EITF 03-1 until further notice. The disclosure requirements of EITF 03-1 were
      effective beginning with our annual report for fiscal 2004. Once the FASB
      reaches a final decision on the measurement and recognition provisions, the
      Company will evaluate the impact of the adoption of the accounting provisions
      of
      EITF 03-1.





In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 123R, "Share-Based Payment." SFAS No. 123R requires employee stock
      options and rights to purchase shares under stock participation plans to be
      accounted for under the fair value method, and eliminates the ability to account
      for these instruments under the intrinsic value method prescribed by Accounting
      Principles Board (APB) Opinion No. 25, and allowed under the original provisions
      of SFAS No. 123. SFAS No. 123R requires the use of an option pricing model
      for
      estimating fair value, which is amortized to expense over the service periods.
      The requirements of SFAS No. 123R are effective for fiscal periods beginning
      after December 15, 2005. If the Company had applied the provisions of SFAS
      No.123R to the financial statements for the years ending December 31, 2005
      and
      2004, net loss would have increased by approximately $165,000 and $520,000,
      respectively. SFAS No. 123R allows for either prospective recognition of
      compensation expense or retrospective recognition, which may be back to the
      original issuance of SFAS No. 123 or only to interim periods in the year of
      adoption. The Company anticipates adopting the prospective method beginning
      in
      the first quarter of 2006.





In
      November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
      of
      ARB No. 43, Chapter 4." "SFAS No. 151 amends the guidance in ARB No. 43,
      "Inventory Pricing," for abnormal amounts of idle facility expense, freight,
      handling costs, and wasted material (spoilage) requiring that those items be
      recognized as current-period expenses regardless of whether they meet the
      criterion of "so abnormal." This statement also requires that allocation of
      fixed production overheads to the costs of conversion be based on the normal
      capacity of the production facilities. The statement is effective for inventory
      costs incurred during the fiscal years beginning after June 15, 2005. Management
      does not expect this statement to have a material impact on the Company's
      consolidated financial position or results of operations.





-18-


In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets,
      an amendment of APB Opinion No. 29." APB Opinion No. 29, "Accounting for
      Nonmonetary Transactions," is based on the principle that exchanges of
      nonmonetary assets should be measured based on the fair value of the assets
      exchanged. SFAS No. 153 amends APB Opinion No. 29, eliminating the exception
      to
      fair value accounting for nonmonetary exchanges of similar productive assets
      and
      replaces it with general exception to fair value accounting for nonmonetary
      exchanges that do not have commercial substance. A nonmonetary exchange has
      commercial substance if the future cash flows of the entity are expected to
      change significantly as a result of the exchange. The statement is effective
      for
      nonmonetary asset exchanges occurring in fiscal periods beginning after June
      15,
      2005. Management does not expect this statement to have a material impact on
      the
      Company's consolidated financial position or results of operations. In March
      2005, FASB issued Interpretation No. 47 (FIN 47) to clarify the guidance
      included in SFAS No. 143, “Accounting for Asset Retirement Obligations”. FIN 47
      requires companies to recognize a liability for the fair value of a legal
      obligation to perform asset retirement activities that are conditional on a
      future event if the amount can be reasonably estimated. If amounts cannot be
      reasonably estimated, certain disclosures will be required about the
      unrecognized asset retirement obligations. FIN 47 was adopted by the Company
      in
      2005. Adoption of this statement did not have a material impact on the Company’s
      consolidated financial position.




In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections -
      a replacement of APB No. 20 and SFAS No. 3”. The pronouncement requires that all
      voluntary changes in accounting principle be reported by retrospectively
      applying the principle to all prior periods that are presented in the financial
      statements. The statement is effective for fiscal years beginning after December
      15, 2005. The Company’s financial position, results of operations or cash flows
      will only be impacted by SFAS No. 154 if it implements changes in accounting
      principles that are addressed by the standard or corrects accounting errors
      in
      future periods.




**Risk
      Factors**




*SinoFresh
      operates in a rapidly changing environment that involves numerous risks, some
      of
      which are beyond our control. The following discussion highlights some of these
      risks* .




*Risks
      Related to the Business*




**We
      have incurred substantial losses and we have a negative cash flow from
      operations and negative working capital.** We
      have
      incurred substantial losses since inception. We have also incurred negative
      cash
      flow from operations during each of the last three years. We had negative
      working capital of $2,815,013 as of December 31, 2005. As a result, our auditors
      have qualified their report on our financial statements for the year ended
      December 31, 2005 with respect to our ability to continue as a going concern.
      In
      light of the foregoing, we need to obtain additional external financing in
      order
      to continue as a going concern. There can be no assurance that any additional
      financing will be available, or if available, that it will be on terms and
      conditions favorable to us.




**We
      have a limited relevant operating history, and we may not be able to achieve
      profitability.** Our
      company has had a cumulative net loss from inception. While we have reduced
      expenditures for administrative costs, product research and development, among
      other things, it will be difficult for us to continue to significantly reduce
      our operating expenses in order to deal with lack of sales growth or
      unanticipated reductions in existing sales. Our failure to balance expenditures
      in any period with sales could have an adverse effect on results of operations.


-19-




We
      have a
      limited relevant operating history upon which an evaluation of our prospects
      can
      be made. Such prospects must be considered in light of the risks, expenses
      and
      difficulties frequently encountered in the establishment of a new company and
      the development of new products in established and crowded markets in a
      highly-competitive consumer industry, such as the U.S. pharmaceutical industry.
      There are also risks, expenses and difficulties encountered in the shift from
      development to commercialization of new products. There can be no assurance
      that
      we will be able to implement successfully our development, manufacturing, and
      marketing strategies, generate meaningful revenues, or attain or maintain
      profitable operations. The possibility of our future success must be considered
      relative to the problems, challenges, complications and delays frequently
      encountered in connection with the development and operation of a new business,
      and the development and marketing of relatively new health care products such
      as
      the SinoFresh products.




**We
      will need significant additional financing to implement our business plan.** We
      need
      additional financing to meet our working capital requirements and to implement
      our business objectives such as marketing, research and development on new
      products and clinical trials. There is no assurance that we will succeed in
      obtaining additional financing or if additional financing is available, that
      it
      will be on terms favorable to us.




**Substantially
      all of our assets, including U.S. patents, are collateral for loans to SinoFresh
      by third parties.** The
      debentures issued in the 2004 debt financing are collateralized by substantially
      all of our assets, including our patents. The debentures are convertible into
      common stock, contain anti-dilution provisions and until the debentures are
      paid
      in full, prohibit us from incurring other indebtedness without the consent
      of
      the debenture holders, except for borrowings in existence on the date of the
      debenture financing or indebtedness to trade creditors or financial institutions
      incurred in the ordinary course of business. The maturity date of the debentures
      is December 6, 2006. The debentures bear interest at 6% per annum and interest
      only payments are payable quarterly. If we default on the payment terms or
      other
      provisions of the debentures, there is no assurance that we will be able to
      successfully negotiate new terms favorable to us. In that event, the lenders
      may
      elect to accelerate the payment terms and may exercise their right against
      our
      collateral, including our patents, which would have material adverse
      consequences to our business and operations.




**If
      an event of default occurs under any one of the debentures, it could result
      in
      an adverse effect for us and cause us to curtail our operations or sell some
      of
      our assets to repay all of the debentures.** As of
      December 31, 2005, we had convertible debentures outstanding to nine investors
      in the aggregate principal amount of $1,730,000. Each debenture provides for
      the
      following events of default, and a default under one debenture is deemed a
      default under all debentures:




-  failure to pay interest and principal payments when due;


-  a
      breach
      by us of any material covenant in the debenture, the related warrant or the
      securities purchase agreement that is not cured within 10 days of a holder's
      notice to us of the breach;


-  a
      breach
      of any material representation and warranty in the debentures or any other
      agreement or document issued by us in connection with the issuance of the
      debentures, which breach has or will have a material adverse effect on the
      rights of the holders of the debenture with respect to the debenture and the
      related securities purchase agreement or the registration rights
      agreement;


-  we
      or our
      subsidiary makes an assignment for the benefit of creditors, or a receiver
      or a
      trustee is appointed for us or our subsidiary;


-  any
      form
      of bankruptcy or insolvency proceeding is instituted by or against us or our
      subsidiary;


-  our
      failure to timely deliver shares of common stock when due upon conversion of
      the
      debentures;


-20-


-  any
      judgment, writ or similar process is entered or filed against us or our
      subsidiary or any of our property or other assets for more than $50,000, and
      shall remain not vacated, bonded or stayed for a period of 20 days, unless
      otherwise consented to by the holders of the debentures, which consent may
      not
      be unreasonably withheld;


-  our
      common stock is no longer quoted on the OTCBB or an equivalent replacement
      exchange, or, if applicable, the Nasdaq, the NYSE or AMEX;


-  a
      failure
      to obtain effectiveness of the registration statement within 60 days from the
      date it is filed with the SEC or 135 days if the SEC reviews the registration
      statement (this requirement has been met as of this filing); and


-  the
      occurrence and continuance of a default under any other of the
      debentures.




If
      we
      default on the debentures and the holders accelerate the maturity date, we
      will
      be required to pay the higher of:




(a)  125%
      multiplied by the Default Sum ("Default Sum" is defined as the sum of (i) the
      then outstanding principal, plus (ii) the accrued and unpaid interest plus
      (iii)
      accrued and unpaid default interest, plus (iv) any amounts owed under the
      registration rights agreement among the Company and the holders of the
      debentures); or




(b)  the
      parity value of the Default Sum, where the "parity value" is equal to product
      of
      (i) the highest number of shares of common stock issuable upon conversion of
      or
      otherwise pursuant to such Default Sum in accordance with the conversion
      provisions of the debentures, multiplied by (ii) the market price for the common
      stock during the period beginning on the date of the first occurrence of an
      event of default and ending on the day prior to the date such default payment
      is
      to be paid.




If
      the
      default payment is not made within 5 business days of written demand for same
      by
      the holder of the debentures, the holders have the right at any time, so long
      as
      we remain in default, to require us to issue, in lieu of the default payment,
      the number of shares of common stock equal to the default payment divided by
      the
      conversion price then in effect.




The
      cash
      required to pay these amounts will most likely come out of our working capital.
      Since we rely on our working capital for day-to-day operations, a default under
      any of the debentures could have a serious and adverse effect on our business,
      operating results and financial condition to such an extent that we are forced
      to restructure, sell some of our assets or curtail our operations, any of which
      would have a detrimental effect on the value of our common stock.




**We
      may not be able to off-set all of our net operating loss carry-forwards against
      future income** .
      At
      December 31, 2005, net operating losses available to be carried forward for
      federal income tax purposes were approximately $10 million expiring in various
      amounts through 2025. Utilization of our net operating losses may be subject
      to
      substantial limitations due to the ownership changes under regulations of the
      Internal Revenue Code and similar state provisions. Such annual limitation
      could
      result in the expiration of the net operating loss before utilization, which
      would subject the Company to have more tax liability than if it had been able
      to
      off-set the net operating losses against income.


-21-




**Our
      ability to implement our business plan depends on our ability to attract and
      retain key personnel.** Our
      future success will depend to a significant extent on the continued services
      of
      the current officers and other necessary personnel, particularly Mr. Fust,
      the
      Chairman of our board of directors and Chief Executive Officer, and Mr. Klein,
      the Chief Financial Officer. The loss of either of these officers would likely
      have a significantly detrimental effect on our business. We have obtained key
      man life insurance policies on the life of Mr. Fust in the amount of
      $400,000.




Our
      prospects will also depend on our ability to attract and retain highly qualified
      research and development, sales, marketing, and managerial personnel.
      Competition for such personnel is intense, and there can be no assurance that
      we
      will be able to employ or retain such personnel.




**If
      the SinoFresh products do not gain widespread market acceptance, results of
      operations will suffer.** The
      Company's original product, SinoFreshTM Nasal & Sinus Care was sold and
      marketed as an over-the-counter drug. It has been reformulated and is now being
      sold and marketed as a health and beauty aid. Management cannot be certain
      that
      this change in status will achieve widespread acceptance by the market.
      Additionally, if any unanticipated problem arises concerning the efficacy of
      SinoFreshTM Daily Throat Spray or any of the other new products we may bring to
      market, or if one or more of these products fails to achieve widespread market
      acceptance because of a lack of marketing capital or for any other reason,
      our
      operating results and prospects would be materially adversely
      affected.




**Unanticipated
      problems associated with product development and commercialization could
      adversely affect our operating results.** The
      successful development of our existing and new products is subject to the risks
      of failure and delay inherent in the development and commercialization of
      products based on innovative technologies. These risks include the possibilities
      that:




·  we
      may
      experience unanticipated or otherwise negative research and development
      results;


·  existing
      or proposed products may be found to be ineffective or unsafe, or may otherwise
      fail to receive required regulatory clearances or approvals;


·  we
      may
      find that existing or proposed products, while effective, are uneconomical
      to
      commercialize or market;


·  existing
      or proposed products may not achieve broad market acceptance; or


·  proprietary
      rights held by third parties preclude us from developing or marketing existing
      or proposed products.




Our
      inability to develop and commercialize our existing products or any new products
      on a timely basis and within our financial budgets could have a material adverse
      effect on operating results and future prospects.




-22-


**FDA
      and other government regulation may restrict our ability to sell our products.** We
      are
      subject to various federal, state and local laws and regulations affecting
      our
      business. Our products are subject to regulation by the FDA, including
      regulations with respect to labeling of products, approval of ingredients in
      products, claims made regarding the products, and disclosure of product
      ingredients. If we do not comply with these regulations, the FDA could force
      us
      to stop selling the affected products or require us to incur substantial costs
      in adopting measures to maintain compliance with these regulations. Our
      advertising claims regarding our products are subject to the jurisdiction of
      the
      FTC as well as the FDA. In both cases we are required to obtain scientific
      data
      to support any advertising or labeling health claims we make concerning our
      products. If we are unable to provide the required support for such claims,
      the
      FTC may stop us from making such claims or require the company to stop selling
      the affected products.




**Our
      inability to provide scientific proof for product claims may adversely affect
      sales.** The
      marketing of SinoFreshTM Daily Throat Spray involves claims that the product
      kills germs and bacteria. Under the FDA and Federal Trade Commission (FTC)
      rules, we are required to obtain scientific data to support any health claims
      we
      make concerning these products. Although we have conducted independent clinical
      tests and provided scientific data to the FDA in support of claims regarding
      these products, we may be required to provide additional data in the future.
      In
      such an event, we cannot be certain that the scientific data we have obtained
      or
      will obtain in support of our claims will be deemed acceptable to the FDA or
      FTC. If the FDA or the FTC requests any supporting information, and we are
      unable to provide support that is acceptable to the FDA or the FTC, either
      agency could require us to stop making the claims in question or restrict us
      from selling the affected products.




**We
      may fail to compete effectively against larger companies.** The
      consumer health products industry is highly competitive. We compete with
      companies in the United States and abroad that are engaged in the development
      of
      both traditional and innovative health care products, including sinus products.
      Many of these companies have much greater financial and technical resources
      and
      production and marketing capabilities than we do. Further, many of these
      companies have already achieved significant product acceptance and brand
      recognition with respect to products that compete directly with the SinoFresh
      products. Our competitors may successfully develop and market superior or less
      expensive products, which could render the current SinoFresh products and other
      future SinoFresh products less valuable or unmarketable.




**If
      we are unable to protect our intellectual property or if we infringe on the
      intellectual property of others, our financial condition and future prospects
      could be materially harmed.** We rely
      significantly on the protections afforded by patent and trademark registrations
      that we routinely seek from the U.S. Patent and Trademark Office (USPTO) and
      from similar agencies in foreign countries. We cannot be certain that any patent
      or trademark application that is filed will be approved by the USPTO or other
      foreign agencies. In addition, we cannot be certain that we will be able to
      successfully defend any trademark, trade name or patent that we hold against
      claims from, or use by, competitors or other third parties. No consistent policy
      has emerged from the USPTO or the courts regarding the breadth of claims allowed
      or the degree of protection afforded under biotechnology and similar patents.
      Our future success will depend on our ability to prevent others from infringing
      on our proprietary rights, as well as our ability to operate without infringing
      upon the proprietary rights of others. We may be required at times to take
      legal
      action to protect our proprietary rights and, despite our best efforts, we
      may
      be sued for infringing on the patent rights of others. Patent litigation is
      costly and, even if we prevail, the cost of such litigation could adversely
      affect our financial condition. If we do not prevail, in addition to any damages
      we might have to pay, we could be required to stop the infringing activity
      or
      obtain a license. We cannot be certain that any required license would be
      available on acceptable terms, or at all. If we fail to obtain a license, our
      business might be materially adversely affected. In addition to seeking patent
      protection, we rely upon a combination of non-disclosure agreements, other
      contractual restrictions and trade secrecy laws to protect proprietary
      information. There can be no assurance that these steps will be adequate to
      prevent misappropriation of our proprietary information or that our competitors
      will not independently develop technology or trade secrets that compete with
      our
      proprietary information.


-23-




**We
      may incur significant costs resulting from product liability claims.** We
      would
      be subject to significant liability should use or consumption of our products
      cause injury, illness or death. Although we carry product liability insurance,
      there can be no assurance that our insurance will be adequate to protect us
      against product liability claims or that insurance coverage will continue to
      be
      available on reasonable terms. A product liability claim, even one without
      merit
      or for which we have substantial coverage, could result in significant legal
      defense costs, thereby increasing our expenses and lowering earnings. Such
      a
      claim, whether or not proven to be valid, could have a material adverse effect
      on product branding and goodwill, resulting in reduced market acceptance of
      our
      products. This in turn could materially adversely affect our results of
      operations and financial condition.




**We
      do not have manufacturing capabilities.** We
      currently do not have the physical or personnel resources to independently
      manufacture our products or any other products that we may develop. We currently
      outsource all of our product manufacturing and packaging operations and intend
      to continue this outsourcing for the foreseeable future. If we are unable to
      maintain suitable arrangements for manufacturing of our SinoFresh products
      or
      any other products, or if our third party contractors fail to adequately perform
      their manufacturing operations, our sales and related financial results could
      be
      materially adversely affected. If, in the future, we decide to establish our
      own
      manufacturing facilities, we will require substantial additional funds and
      significant additional personnel to undertake such operations. We cannot be
      certain that such funding or a sufficient number of such qualified persons
      will
      be available **.**




**Return
      of a significant amount of product could harm our business.** Our
      product has a 30-day, unconditional, money back guarantee. Any consumer, who
      is
      not satisfied with our product within this time period for any reason, or no
      reason at all, may return it or any unused portion for a full refund. Most
      large
      retail chains have their own established policies for product returns and we
      intend to fully comply with these policies as well.




We
      believe product returns will be less than one percent (1%) of sales, but there
      can be no assurance that actual levels of returns will not significantly exceed
      the amounts anticipated. Should an adverse reaction to any of our products
      occur
      affecting a significant number of customers, a product "recall" could occur
      which could materially impact our financial condition and our ability to
      successfully re-enter the market following the recall. Additionally, although
      we
      will not directly engage in the manufacture of any product we market and sell,
      we could be exposed to product liability claims from faulty
      manufacture.




**We
      may be required to indemnify our directors and officers.** We have
      authority under Section 607.0850 of the Florida Business Corporation Act to
      indemnify our directors and officers to the extent provided in that statute.
      Our
      Articles of Incorporation require SinoFresh to indemnify each of our directors
      and officers against liabilities imposed upon them (including reasonable amounts
      paid in settlement) and expenses incurred by them in connection with any claim
      made against them or any action, suit or proceeding to which they may be a
      party
      by reason of their being or having been a director or officer of the company.
      We
      maintain officer's and director's liability insurance coverage with limits
      of
      liability of $5,000,000. There can be no assurance that such insurance will
      be
      available in the future, or that if available, it will be available on terms
      that are acceptable to us. Furthermore, there can be no assurance that the
      insurance coverage provided will be sufficient to cover the amount of any
      judgment awarded against an officer or director (either individually or in
      the
      aggregate). Consequently, if such judgment exceeds the coverage under the
      policy, SinoFresh may be forced to pay such difference.




**We
      may have certain financial exposure if there was not an exemption from
      registration for the issuance of securities in connection with the acquisition
      by merger of our predecessor.** In 2003,
      we issued 10,768,490 shares of common stock, 858,170 shares of Series A
      preferred stock, 1,500,000 shares of Series B preferred stock, and 1,218,711
      shares of Series C preferred stock in connection with the acquisition by merger
      of our predecessor. We have been unable to obtain documentation which
      conclusively establishes that the issuance of these shares was exempt from
      registration under the Securities Act of 1933. Because this documentation is
      not
      available, it is possible that our issuance of shares in connection with the
      merger may not have been in compliance with the registration provisions of
      the
      federal and state securities laws. As a result, we could be exposed to claims
      for rescission by shareholders who received shares in the merger. Although
      we
      would vigorously defend against any such actions, litigation may be costly
      and
      there is no assurance of the outcome. If the Company were not successful in
      the
      defense of these claims, the cost of repurchasing the shares could be
      material.


-24-




***Risks
      Related to Our Common Stock***




**The
      large number of shares eligible for immediate and future sales may depress
      the
      price of our stock.** Our
      Articles of Incorporation authorize the issuance of 500,000,000, shares of
      common stock, no par value per share, and 200,000,000 shares of preferred stock,
      no par value per share. As of December 31, 2005, we had outstanding 14,505,229
      shares of common stock, of which 10,768,490 shares became available for public
      resale under Rule 144 in September 2004. Also as of December 31, 2005, we had
      outstanding a total of 3,173,252 shares of Series A, B and C preferred stock
      which are convertible into a total of 5,536,502 shares of common stock, all
      of
      which common shares became eligible for public resale under Rule 144 in
      September 2004. We have reserved 3,000,000 shares of common stock for issuance
      in respect of option grants under our stock option plan. From those available
      shares, outstanding options have been granted for 1,528,750 shares of common
      stock, and there remain available for options under the plan 1,471,250 shares
      of
      common stock. In addition, there are 417,681 shares of common stock that are
      issuable upon exercise of stock options issued to independent consultants.
      There
      are 3,410,090 shares that are issuable upon exercise of outstanding warrants,
      and 3,145,458 shares that are issuable upon conversion of debentures, and up
      to
      1,663,650 shares that may be issued under the debentures on account of interest
      or anti-dilution adjustments. The outstanding warrants and options contain
      exercise prices ranging from $0.25 to $7.00. Therefore, the desire of the
      holders of those warrants and options to sell will depend on the market price
      of
      our common stock at any given time. Further, if we default under the terms
      of
      the debentures, we may be required to issue additional common stock to the
      debenture holders if we fail to make the default payment stated in the
      debentures. Sales of substantial amounts of our common stock in the open market,
      could adversely affect the market price of our common stock.




Our
      board
      of directors has the authority to issue additional shares of common stock and
      preferred stock up to the authorized amount stated in our Articles of
      Incorporation. Our board of directors may choose to issue some or all of such
      shares to acquire one or more businesses or other types of property, or to
      provide additional financing in the future. The issuance of any such shares
      may
      result in a reduction of the book value or market price of the outstanding
      shares of our common stock. If we do issue any such additional shares, such
      issuance also will cause a reduction in the proportionate ownership and voting
      power of all other shareholders. Further, any such issuance may result in a
      change of control of SinoFresh.




**We
      filed a registration statement in order for certain shareholders to sell their
      stock and a substantial number of shares being sold in the market may cause
      our
      stock price to decline.** We filed
      a registration statement for certain holders of our equity securities in
      accordance with registration rights agreements with them. The registration
      statement, which was declared effective by the SEC on February 1, 2005, allows
      those holders the ability to sell their stock without reliance on the holding
      period and other requirements of Rule 144. A total of 10,041,153 shares of
      common stock are included in the registration statement, comprised of the
      following: 1,018,490 shares of issued and outstanding restricted common stock;
      4,031,740 shares issuable upon exercise of warrants with exercise prices ranging
      from $0.29 to $7.00 per share; 3,327,273 shares that are issuable upon
      conversion of outstanding debentures at a conversion rate of $0.55 per share,
      without further payment for those shares; and an additional 1,663,650 shares
      of
      common stock that may be issued on account of interest or anti-dilution
      adjustments relating to the debentures. Sales of substantial amounts of such
      common stock in the open market could adversely affect the market price of
      our
      common stock.





**The
      price of our common stock may continue to be volatile.** The
      market price of our common stock, which is quoted for trading on the OTC
      Electronic Bulletin Board, has been highly volatile and may continue to be
      volatile in the future. Any or a combination of the following factors could
      cause the market value of our common stock to decline quickly:




·
            operating
                results that differ from market
                expectations;




·
              negative
                  or other unanticipated results of clinical trials or other
                  testing;
  -25-


·
            delays
                in product development;




·
            technological
                innovations or commercial product introductions by our
                competitors;




·
            changes
                in government regulations;




·
            developments
                concerning proprietary rights, including pending or threatened patent
                litigation;




·
            public
                concerns regarding the safety of any of our products;
                and




·
            general
                economic and stock market conditions.




Since
      the
      inception of trading activities in September 2003, the stock market has
      experienced, and it may continue to experience, significant price and volume
      fluctuations. These fluctuations have particularly affected the market prices
      of
      equity securities of many small capitalization companies that are not yet
      profitable or that experience low or inconsistent earnings. Often, the affect
      on
      the price of such securities is disproportionate to the operating performance
      of
      such companies. In our case, such broad market fluctuations may adversely affect
      your ability to dispose of your shares at a price equal to or above the price
      at
      which you purchased such shares.




**Our
      common stock may be subject to penny stock regulation, which may make it
      difficult for investors to sell our common stock.** The
      SEC
      has adopted rules that regulate broker/dealer practices in connection with
      transactions in penny stocks. Penny stocks generally are equity securities
      with
      a price of less than $5.00 per share (other than securities registered on
      certain national securities exchanges or quoted on the NASDAQ Stock Market,
      provided that current price and volume information with respect to transactions
      in such securities is provided by the exchange system). The penny stock rules
      require a broker/dealer, prior to completing a transaction in a penny stock
      not
      otherwise exempt from the rules, to deliver a standardized risk disclosure
      document prepared by the SEC that provides information about penny stocks and
      the nature and level of risks in the penny stock market. The broker/dealer
      also
      must provide the customer with bid and offer quotations for the penny stock,
      the
      compensation of the broker/dealer and its salesperson in the transaction, and
      monthly account statements showing the market value of each penny stock held
      in
      the customer's account. In addition, the penny stock rules require that prior
      to
      a transaction in a penny stock not otherwise exempt from such rules the
      broker/dealer must make a special written determination that a penny stock
      is a
      suitable investment for the purchaser and receive the purchaser's written
      agreement to the transaction. Our common stock will likely be subject to the
      penny stock rules. These disclosure requirements may have the effect of reducing
      the level of trading activity in any secondary market for our common stock.
      Accordingly, holders of our common stock may find it difficult to sell their
      shares, if they are able to do so at all.




**We
      do not expect to pay dividends for the foreseeable future.** For
      the
      foreseeable future, we intend to retain any earnings to finance the development
      and expansion of our business, and we do not anticipate paying any cash
      dividends on our common stock. Any future determination to pay dividends will
      be
      at the discretion of our board of directors and will be dependent upon then
      existing conditions, including our financial condition and results of
      operations, capital requirements, contractual restrictions, business prospects,
      and other factors that the board of directors considers relevant.


-26-




**Our
      preferred stock may cause dilution.** Our
      Articles of Incorporation authorize the issuance of up to 200,000,000 shares
      of
      "blank check" preferred stock with such rights and preferences as our board
      of
      directors, without further shareholder approval, may determine from time to
      time. Of these preferred shares, 858,170 shares are designated as Series A
      preferred stock, 1,500,000 shares are designated as Series B preferred stock,
      and 1,250,000 shares are designated as Series C preferred stock. As of December
      2005, we had 810,002 shares of outstanding Series A preferred stock; 1,500,000
      shares of outstanding Series B preferred stock; and 863,250 shares of
      outstanding Series C preferred stock. Series A preferred stock is convertible
      into common and has voting rights with the common, on a one-for one basis.
      The
      Series B and Series C preferred stock are convertible into common stock and
      have
      voting rights with the common stock on a one for two basis. As of December,
      2005, a total 5,536,502 shares of common stock issuable upon conversion of
      all
      of our outstanding preferred stock are eligible for public resale under Rule
      144. Furthermore, each share of Series A, Series B and Series C preferred stock
      has a liquidation preference of $2.00 per share on an as converted basis before
      any holders of common would be entitled to receive payment for their shares
      or
      dividends upon a liquidation of SinoFresh. As of December 31, 2005, there
      remained 196,826,748 shares of authorized but undesignated and unissued shares
      of preferred stock that may be sold in the future and that can, at the
      discretion of our board of directors, be designated as another series of
      preferred stock with dividend, liquidation, conversion, voting or other rights
      and preferences that are senior, and not available, to the holders of our common
      stock. Thus, issuances of new series of preferred stock could adversely affect
      the relative voting power, distributions and other rights of the common stock.
      Holders of our common stock could realize less than the amount of dividends
      and/or distributions to which they would otherwise be entitled.




Further,
      preferred stock could be used as a method of discouraging, delaying, or
      preventing a take-over of SinoFresh. If we issue "blank check" preferred stock,
      it could have a dilutive effect upon our common stock. This would decrease
      the
      chance that our shareholders would realize a premium over market price for
      their
      shares of common stock as a result of a takeover bid.




-27-


**ITEM
      7.****FINANCIAL
      STATEMENTS******




REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board
      of
      Directors


SinoFresh
      HealthCare, Inc.


Englewood,
      Florida





We
      have
      audited the accompanying consolidated balance sheet of SinoFresh HealthCare,
      Inc. and subsidiary as of December 31, 2005 and the related consolidated
      statements of operations, changes in stockholders' equity and cash flows for
      each of the two years in the period ended December 31, 2005. These consolidated
      financial statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.




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




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of SinoFresh HealthCare, Inc.
      and subsidiary at December 31, 2005, and the results of their operations and
      their cash flows for each of the two years in the period ended December 31,
      2005
      in conformity with accounting principles generally accepted in the United States
      of America.




The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. As discussed in Note 1, the Company
      has incurred substantial losses since its inception, has a working capital
      deficiency at December 31, 2005, and has incurred negative cash flow from
      operations. These factors, among others, raise substantial doubt about its
      ability to continue as a going concern. Management's plans related to these
      matters are also described in Note 1. The financial statements do not include
      any adjustments that might result from the outcome of this uncertainty.




Date: February
              17, 2006
            By:
            /s/ Moore
              Stephens Lovelace, P.A.Moore
              Stephens Lovelace, P.A.Certified
                Public Accountants
              Orlando,
                Florida







-28-


SINOFRESH
        HEALTHCARE, INC.
 CONSOLIDATED
        BALANCE SHEET
 As
        of
        December 31, 2005
 
 ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              148,037Accounts
                  receivable, net of allowances of $49,703
              
              
              274,426Inventory,
                  net of reserves
              
              
              113,001Other
                  current assets
              
              
              192,930TOTAL
                  CURRENT ASSETS
              
              
              728,394FURNITURE
                  AND EQUIPMENT, NET
              
              
              79,172DEFERRED
                  DEBT ISSUANCE COSTS
              
              
              177,713PATENTS,
                  NET
              
              
              2,288,478GOODWILL
              
              
              2,409,401OTHER
                  ASSETS
              
              
              6,418$
              5,689,576LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCURRENT
                  LIABILITIESConvertible
                  debentures, net of unamortized debt discounts
              
              
              1,465,694Current
                  portion of capital leases
              
              $
              23,745Accounts
                  payable (including amounts due to related parties of $121,077)
              
              
              1,345,657Accrued
                  expenses
              
              
              708,311TOTAL
                  CURRENT LIABILITIES
              
              
              3,543,407CAPITAL
                  LEASES, NET OF CURRENT MATURITIES
              
              
              37,915TOTAL
                  LIABILITIES
              
              
              3,581,322COMMITMENTS
                  AND CONTINGENCIESSTOCKHOLDERS’
                  EQUITY:Preferred
                  Stock, no par value; $2 liquidation value per share; 200,000,000shares
                  authorized:Series
                  A convertible preferred stock, voting; 858,170 shares
                  authorized,810,002
                  shares issued and outstanding
              
              
              1,620,003Series
                  B convertible preferred stock, voting; 1,500,000 shares authorized,
                  issuedand
                  outstanding
              
              
              3,000,000Series
                  C convertible preferred stock, voting; 1,250,000 shares authorized;863,250
                  shares issued and outstanding
              
              
              1,549,556Common
                  stock, no par value; 500,000,000 shares authorized; 14,505,229shares
                  issued and outstanding
              
              
              5,823,421Accumulated
                  deficit
              
              
              (9,820,965
              )Deferred
                  stock-based compensation
              
              
              (63,761
              )TOTAL
                  STOCKHOLDERS’ EQUITY
              
              
              2,108,254TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              5,689,576
 See
          Notes
          to Consolidated Financial Statements
  -29-
  SINOFRESH
        HEALTHCARE, INC.
 CONSOLIDATED
        STATEMENTS OF OPERATIONS
 
 **Year
                  Ended**
              
              **Year
                  Ended****December
                  31, 2005**
              
              **December
                  31, 2004**REVENUE,
                  net
              
              $
              2,939,189
              
              $
              3,564,514COST
                  OF REVENUE
              
              
              874,614
              
              
              942,623GROSS
                  PROFIT
              
              
              2,064,575
              
              
              2,621,891OPERATING
                  EXPENSESSalaries
                  and other compensation expenses
              
              
              1,159,504
              
              
              1,401,419Professional
                  fees
              
              
              583,322
              
              
              1,465,294Other
                  general and administrative expenses
              
              
              454,649
              
              
              567,913Marketing
                  and advertising expenses
              
              
              967,942
              
              
              1,137,832Research
                  and development expenses
              
              
              180,921
              
              
              236,387Depreciation
                  and amortization
              
              
              261,801
              
              
              261,697TOTAL
                  OPERATING EXPENSES
              
              
              3,608,139
              
              
              5,070,542LOSS
                  FROM OPERATIONS
              
              
              (1,543,564
              )
              
              (2,448,651
              )OTHER
                  INCOME (EXPENSE):Interest,
                  net
              
              
              (661,532
              )
              
              (1,303,380
              )Other
                  income
              
              
              371,588
              
              
              45,751TOTAL
                  OTHER EXPENSE
              
              
              (289,944
              )
              
              (1,257,629
              )NET
                  LOSS BEFORE INCOME TAXES
              
              
              (1,833,508
              )
              
              (3,706,280
              )PROVISION
                  FOR INCOME TAXES
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (1,833,508
              )
              $
              (3,706,280
              )NET
                  LOSS PER COMMON SHARE-Basic
                  and diluted
              
              $
              (0.13
              )
              $
              (0.28
              )WEIGHTED
                  AVERAGE COMMON SHARES OUTSTANDING-Basic
                and diluted
              
              
              14,336,037
              
              
              13,442,660
 See
          Notes
          to Consolidated Financial Statements
 -30-
  SINOFRESH
        HEALTHCARE, INC.
 CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 
 Preferred
                  Stock**Common
                  Stock**
              ****
              **Series
                  A**
              ****
              **Series
                  B**
              ****
              **Series
                  C**
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              **Total**
              ********
              ****
              **Number**
              ****
              ****
              ****
              **Number**
              ****
              ****
              ****
              **Number**
              ****
              ****
              ****
              **Number**
              ****
              ****
              ****
              **Deferred
                  stock-based**
              ****
              **Subscriptions**
              ****
              **Accumulated**
              ****
              **Stockholders'**
              ********
              **of
                  Shares**
              ****
              **Amount**
              ****
              **of
                  Shares**
              ****
              **Amount**
              ****
              **of
                  Shares**
              ****
              **Amount**
              ****
              **of
                  Shares**
              ****
              **Amount**
              ****
              **compensation**
              ****
              **Receivable**
              ****
              **Deficit**
              ****
              **Equity**Balance
                  at December 31, 2003
              
              
              13,301,823
              
              $
              2,251,991
              
              
              858,170
              
              $
              1,716,339
              
              
              1,500,000
              
              $
              3,000,000
              
              
              1,218,711
              
              $
              2,189,261
              
              $
              -
              
              $
              (252,000
              )
              $
              (4,281,177
              )
              $
              4,624,414Payments
                  received onsubscriptions
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              120,000
              
              
              -
              
              
              120,000Issuance
                  of common sharesfor
                  services
              
              
              212,500
              
              
              147,375
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              147,375Conversion
                  of Series A preferredto
                  common
              
              
              34,375
              
              
              68,750
              
              
              (34,375
              )
              
              (68,750
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of Series C preferredto
                  common
              
              
              548,422
              
              
              493,580
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (274,211
              )
              
              (493,580
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Issuance
                  of options and warrantsto
                  consultants
              
              
              -
              
              
              494,182
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              494,182Issuance
                  of options to employees
              
              
              -
              
              
              299,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (299,500
              )
              
              -
              
              
              -
              
              
              -Amortization
                  of unearned stockbased
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              208,367
              
              
              -
              
              
              -
              
              
              208,367Issuance
                  of warrants in connectionwith
                  the convertible debentures
              
              
              -
              
              
              610,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              610,000Beneficial
                  conversion of debentures
              
              
              -
              
              
              1,220,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,220,000Net
                  loss, year endedDecember
                  31, 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,706,280
              )
              
              (3,706,280
              )Balance
                at December 31, 2004
              
              
              14,097,120
              
              $
              5,585,378
              
              
              823,795
              
              $
              1,647,589
              
              
              1,500,000
              
              $
              3,000,000
              
              
              944,500
              
              $
              1,695,681
              
              $
              (91,133
              )
              $
              (132,000
              )
              $
              (7,987,457
              )
              $
              3,718,058
 See
        Notes
        to Consolidated Financial Statements
 
 -31-
 
 SINOFRESH
        HEALTHCARE, INC.
 CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
 
 ****
              ****
              ****
              **Preferred
                  Stock**
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Common
                  Stock**
              ****
              **Series
                  A**
              ****
              **Series
                  B**
              ****
              **Series
                  C**
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              **Total**
              ********
              ****
              **Number**
              ****
              ****
              ****
              **Number**
              ****
              ****
              ****
              **Number**
              ****
              ****
              ****
              **Number**
              ****
              ****
              ****
              **Deferred
                  stock-**
              ****
              **Subscriptions**
              ****
              **Accumulated**
              ****
              **Stockholders'**
              ********
              **of
                  Shares**
              ****
              **Amount**
              ****
              **of
                  Shares**
              ****
              **Amount**
              ****
              **of
                  Shares**
              ****
              **Amount**
              ****
              **of
                  Shares**
              ****
              **Amount**
              ****
              **based
                  compensation**
              ****
              **Receivable**
              ****
              **Deficit**
              ****
              **Equity**Write-off
                  of unpaid subscriptions
              
              
              -
              
              
              (132,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              132,000
              
              
              -
              
              $
              -Conversion
                  of Series A preferredto
                  common
              
              
              13,793
              
              
              27,586
              
              
              (13,793
              )
              
              (27,586
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of Series C preferredto
                  common
              
              
              162,500
              
              
              146,125
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (81,250
              )
              
              (146,125
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Issuance
                  of options and warrantsfor
                  services
              
              
              -
              
              
              58,832
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              58,832Amortization
                  of unearned stockbased
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              27,372
              
              
              -
              
              
              -
              
              
              27,372Conversion
                  of debentures to equity
              
              
              181,816
              
              
              100,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              100,000Issuance
                  of shares to settle lawsuit
              
              
              50,000
              
              
              37,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              37,500Net
                  loss, year endedDecember
                  31, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,833,508
              )
              
              (1,833,508
              )Balance
                  at December 31, 2005
              
              
              14,505,229
              
              $
              5,823,421
              
              
              810,002
              
              $
              1,620,003
              
              
              1,500,000
              
              $
              3,000,000
              
              
              863,250
              
              $
              1,549,556
              
              $
              (63,761
              )
              $
              -
              
              $
              (9,820,965
              )
              $
              2,108,254See
                  notes to consolidated financial statements
 -32-
   SINOFRESH
        HEALTHCARE, INC.
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 **Year
                  Ended**
              ****
              **Year
                  Ended**
              ********
              ****
              **December
                  31, 2005**
              ****
              **December
                  31, 2004**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (1,833,508
              )
              $
              (3,706,280
              )Adjustments
                  to reconcile net loss to net cashused
                  in operations:Beneficial conversion feature of the convertible
                  debentures
              
              
              -
              
              
              1,220,000Amortization
                  of Stock, options and warrants issued for services
              
              
              62,962
              
              
              462,359Amortization
                  and depreciation
              
              
              261,801
              
              
              261,697Stock
                  issued as settlement cost
              
              
              37,500
              
              
              -Provision
                  for bad debts and returns
              
              
              35,459
              
              
              (756
              )Provision
                  for excess inventory
              
              
              34,467
              
              
              -Amortization
                  of debt discount
              
              
              320,277
              
              
              25,417Amortization
                  of deferred debt issuance costs
              
              
              215,349
              
              
              17,089Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              (80,612
              )
              
              417,452Inventory
              
              
              (104,344
              )
              
              128,883Other
                  current assets
              
              
              153,780
              
              
              (29,921
              )Other
                  assets
              
              
              -
              
              
              800Accounts
                  payable
              
              
              (460,379
              )
              
              1,135,653Accrued
                  expenses
              
              
              217,927
              
              
              (188,740
              )NET
                  CASH USED IN OPERATING ACTIVITIES
              
              
              (1,139,321
              )
              
              (256,347
              )INVESTING
                  ACTIVITIES:Payments
                  for purchases of property and equipment
              
              
              -
              
              
              (2,947
              )NET
                  CASH USED IN INVESTING ACTIVITIES
              
              
              -
              
              
              (2,947
              )FINANCING
                  ACTIVITIES:Payments
                  received on subscriptions receivable
              
              
              -
              
              
              120,000Proceeds
                  from long-term debt borrowings
              
              
              -
              
              
              1,830,000Deferred
                  debt issuance costs
              
              
              -
              
              
              (141,850
              )Payments
                  on debt and capital leases
              
              
              (45,066
              )
              
              (584,826
              )NET
                  CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
              
              
              (45,066
              )
              
              1,223,324NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (1,184,387
              )
              
              964,030CASH
                  AND CASH EQUIVALENTS - beginning of year
              
              
              1,332,424
              
              
              368,394CASH
                  AND CASH EQUIVALENTS - end of year
              
              $
              148,037
              
              $
              1,332,424SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:Cash
                  paid during the period for interest
              
              $
              136,619
              
              $
              70,926NON-CASH
                ACTIVITY:Warrants
                issued to placement agentincreasing
                deferred debt issuance costs and common stock
              
              $
              -
              
              $
              268,301Warrants
                issued in
                connection with convertible debenturesdecreasing
                convertible debentures and increasing common stock
              
              $
              -
              
              $
              610,000Warrants
                  issued in connection with a service agreementincreasing
                other current assets and
                common stock
              
              $
              -
              
              $
              119,264Conversion
                  of accounts payable to a short term note payable
              
              $
              22,875
              
              $
              -Options
                  and warrants issued in connection with servicesagreementsincreasing other current assets and common
                  stock
              
              $
              23,242
              
              $
              -Conversion
                  of convertible debentures into common stock
              
              $
              100,000
              
              $
              -
 See
          notes
          to consolidated financial statements
 -33-


**SINOFRESH
      HEALTHCARE, INC.**




Notes
      to
      Condensed Consolidated Financial Statements


For
      the
      years ended December 31, 2005 and 2004





**NOTE
      1: Nature of Business and Summary of Significant Accounting Policies**




ORGANIZATION:
      SinoFresh HealthCare, Inc., a Florida Corporation (“SinoFresh” or the “Company”)
      came into existence as a result of a series of events. The Company's
      predecessor, SinoFresh HealthCare, Inc. ("SinoFresh - Delaware") was
      incorporated in the state of Delaware on October 15, 2002. In November 2002
      SinoFresh - Delaware entered into an asset purchase agreement (the "Asset
      Purchase Agreement") whereby it received certain assets and liabilities of
      SinoFresh Laboratories, Inc. effective at the close of business on November
      15,
      2002 in exchange for 808,170 shares of its Series A preferred stock.




On
      September 8, 2003 (the "Merger Date"), SinoFresh - Delaware, SinoFresh
      Acquisition Corp. (Acquisition), SinoFresh Corp., formerly known as e-Book
      Network, Inc., a Florida corporation, and the sole director and majority
      shareholder of SinoFresh Corp. entered into a Merger Agreement. In addition,
      SinoFresh Corp. changed its name to SinoFresh HealthCare, Inc.




Under
      the
      Merger Agreement, SinoFresh Corp. acquired all of the outstanding capital stock
      of SinoFresh - Delaware.




Subsequent
      to the merger, Acquisition, which changed its name to SinoFresh Corporation,
      remains the operating subsidiary of the Company. Since the former shareholders
      of SinoFresh - Delaware also obtained management control of SinoFresh, the
      merger transaction was treated as a recapitalization of the Company, with
      SinoFresh - Delaware as the acquirer for financial accounting purposes.




The
      Company's ability to continue as a going concern is subject to uncertainty
      due
      to the Company’s history of losses, limited financial resources and need for
      additional working capital to implement the Company's business plan. In this
      connection, the Company requires additional working capital in order to market
      and distribute its products, exploit the technology underlying its patents,
      further develop existing and new products, and pay its existing accounts
      payable. On December 31, 2005, the Company had current assets of approximately
      $728,000 (including cash and cash equivalents of approximately $148,000) and
      current liabilities of approximately $3,543,000. As a result, the Company's
      current liquidity is extremely limited and the Company will require a
      significant amount of additional working capital in order to meet its current
      working capital requirements. In order to address these issues, the Company
      is
      seeking to raise additional working capital through the issuance of debt and
      equity securities. Although the Company believes that it will be able to obtain
      additional working capital, there can be no assurance that the Company's efforts
      will be successful. The accompanying statements do not include any adjustments
      that might be necessary if the Company were unable to continue as a going
      concern.




NATURE
      OF
      BUSINESS: The Company is engaged in the research, development, and marketing
      of
      novel therapies to treat inflammatory and infectious diseases and disorders
      of
      the upper respiratory system.


-34-




ACCOUNTING
      ESTIMATES: The preparation of financial statements in conformity with generally
      accepted accounting principles 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 consolidated
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. Actual results could differ from those estimates. The
      Company's significant estimates and assumptions primarily arise from risks
      and
      uncertainties associated with potential future product returns, the
      uncollectibility of accounts and other receivables, inventory obsolescence,
      valuation of acquired assets for purposes of allocating the purchase price,
      including patents and goodwill, subsequent recoverability analysis, and
      estimated accruals relating to legal contingencies.




CONCENTRATION
      OF RISK: Financial instruments that potentially subject the Company to
      significant concentrations of credit risk consist primarily of cash and cash
      equivalents and accounts receivable. The Company's investment policy is to
      invest in low risk, highly liquid investments. At December 31, 2005, over
      ninety-two percent (92%) of gross accounts receivable were due from four
      customers. Additionally, approximately seventy-two percent (72%) of the
      Company's revenues during 2005 were derived from four customers. In 2004,
      approximately seventy percent (70%) of the Company’s revenues were derived from
      three customers.




The
      Company's business is dependent on its ability to utilize the underlying patents
      and a third party manufacturer provides all of the Company's manufacturing
      capacity. The Company is also dependent on the revenue from the sale of
      SinoFreshTM Nasal Mist, its primary product available for sale which accounted
      for approximately ninety-five percent (95%) and one-hundred percent (100%)
      of
      its revenues for the years ended December 31, 2005 and 2004,
      respectively.




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




FAIR
      VALUE OF FINANCIAL INSTRUMENTS: All financial instruments are carried at amounts
      that approximate fair value.




ACCOUNTS
      RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: Accounts receivable result
      from
      the sale of the Company's products at sales prices, net of estimated sales
      returns and other allowances. The Company estimates an allowance for doubtful
      accounts based on a specific identification basis and additional allowances
      based on historical collections experience. Accounts are considered past due
      when outstanding beyond the stated payment terms. The Company will not write-off
      any account receivable until all reasonable means of collection have been
      exhausted and collection does not appear probable.




INVENTORIES:
      Inventories are valued at the lower of cost (determined on a first-in, first-out
      basis) or market and are evaluated for product obsolescence on a periodic basis
      (see note 2).




DEFERRED
      DEBT ISSUANCE COSTS: Deferred debt issuance costs relate to placement agent
      fees
      and legal fees associated with the convertible debentures (see note 5). The
      valuation of the warrants utilized to pay these fees was computed using the
      Black-Scholes method and is being amortized over the 24 month term of the
      debentures.




FURNITURE
      AND EQUIPMENT: Furniture and equipment is stated at cost and is depreciated
      using the straight-line method over five to seven years (see note 3).




PATENTS:
      Patents are stated at cost and are amortized over thirteen years (the
      approximate life of the patents on the date of purchase) using the straight-line
      method (see note 4).


-35-




GOODWILL:
      Goodwill represents the excess purchase price and related costs over the fair
      value assigned to the net tangible and identifiable intangible assets of
      businesses acquired. Goodwill is carried at lower of cost or market and is
      subject to annual impairment evaluation, or interim impairment evaluation if
      an
      interim triggering event occurs which indicates that the carrying amount of
      goodwill may not be recoverable. Management believes that based on testing
      performed in 2005, the Company's long-lived assets, including goodwill are
      not
      impaired.




LONG-LIVED
      ASSETS: The Company reviews long-lived assets, including intangible assets,
      for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount of an asset may not be recoverable. Recoverability of long-lived
      assets is measured by comparison of its carrying amount to the undiscounted
      cash
      flows that the asset or asset group is expected to generate. If such assets
      are
      considered to be impaired, the impairment to be recognized is measured by the
      amount by which the carrying amount of the property, if any, exceeds its fair
      market value.




REVENUE
      RECOGNITION: In general, revenue from sales is recognized at the time products
      are shipped less estimated sales returns, certain vendor cooperative promotional
      costs and other allowances.




MARKETING
      AND ADVERTISING EXPENSES:  Included
      in marketing and advertising expenses are costs associated with promoting the
      Company's product, public relations, conducting marketing studies and other
      internal expenses. The Company uses television, radio and print as its primary
      forms of media for product promotion. Product promotion costs were $581,027
      and
      $913,385 for the years ended December 31, 2005 and 2004, respectively. In
      addition to media, the Company also promoted its product through the services
      of
      a public relations firm and through entertainer, Ed McMahon. Public relations
      expenses were $287,237 and $152,042 for the years ended December 31, 2005 and
      2004, respectively. The Company has incurred $99,678 and $72,405 for the years
      ended December 31, 2005 and 2004, respectively, for market studies and other
      internal related expenses. All costs for advertising media are expensed in
      the
      period in which such media has been presented to its targeted
      audience.




RESEARCH
      AND DEVELOPMENT COSTS: SinoFresh's policy is to expense all research and
      development expenses as incurred. Research and development expenses during
      the
      years ended December 31, 2005 and 2004 totaled approximately $181,000 and
      $236,000, respectively. Future research and development will be focused on
      advancing scientific research on existing products as well as planned new
      product offerings in the health care industry, in general, and in the
      respiratory and infectious disease category, in particular. These product
      offerings may include both over-the-counter and ethical products. However,
      substantial research and development costs are not anticipated until outside
      funding is received for such projects or cash flow from operations is sufficient
      to support continued programs. New product development will be supported by
      clinical studies to ensure the safety and efficaciousness of the Company's
      products, as well as for line extension derivatives of current and future
      products.




SALES
      INCENTIVES AND CONSIDERATION PAID TO RETAILERS: The Company accounts for certain
      promotional costs such as sales incentives, promotional funds, cooperative
      advertising, rebates and consumer coupon redemptions as a reduction of net
      sales. For the years ended December 31, 2005 and 2004, the Company had recorded
      approximately $475,000 and $617,000, respectively, as a reduction of revenue
      related to these costs.




SHIPPING
      AND HANDLING COSTS: Shipping and handling costs are classified as a cost of
      sales and those billed to customers are recorded as revenue on the consolidated
      statements of operations.


-36-




STOCK-BASED
      COMPENSATION: The Company accounts for employee stock-based compensation
      arrangements in accordance with the provisions of Accounting Principles Board
      Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and complies
      with the disclosure provisions of Statement of Financial Accounting Standards
      (SFAS) No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). Under
      APB No. 25, compensation cost is determined based on the difference, if any,
      on
      the measurement date, which is generally the grant date, between the fair value
      of the Company's stock and the amount an employee must pay to acquire the stock
      (see note 6).




The
      fair
      value of each stock option or warrant grant issued to non-employees is estimated
      on the measurement date using the Black-Scholes method and is amortized over
      the
      related service period. Expenses recognized for such issuances were
      approximately $575,000 and $173,000 during the years ended December 31, 2005
      and
      December 31, 2004, respectively.




The
      following table reflects proforma supplemental financial information related
      to
      stock-based employee compensation, as required by SFAS No. 123 and SFAS
      148:




**2005**
            ****
            **2004**Net
                loss, as reported
            
            $
            (1,833,508
            )
            $
            (3,706,280
            )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
            
            
            (164,584
            )
            
            (520,005
            )Unaudited
                pro forma net loss, as if the fair value method had been applied
                to all
                awards
            
            $
            (1,998,092
            )
            $
            (4,226,285
            )Net
                loss per common share, as reported
            
            $
            (0.13
            )
            $
            (0.28
            )Unaudited
                pro forma net loss per common share, as if the fair value method
                had been
                applied to all awards
            
            $
            (0.14
            )
            $
            (0.31
            )




In
      determining fair market value for options granted during 2005, the Company
      assumed a risk-free rate of 3%, an expected life of 5 years, volatility ranging
      from 2.11 to 3.11 and no expected dividends. In determining fair market value
      for options granted during 2004, the Company assumed a risk-free rate of 3%,
      an
      expected life of 5 years, volatility ranging from 2.11 to 3.11 and no expected
      dividends.




INCOME
      TAXES: Deferred tax assets and liabilities and the resultant provision for
      income taxes are determined based on the difference between the financial
      statements and tax basis of assets and liabilities using enacted tax rates
      in
      effect for the year in which the differences are expected to reverse. Deferred
      tax assets are recognized when management determines that it is more likely
      than
      not that the asset will be realized (see note 9).


-37-




NET
      INCOME (LOSS) PER SHARE: Basic net income (loss) per share and diluted net
      income (loss) per share have been computed based upon the weighted average
      number of common shares outstanding during the year. Assumed common stock
      equivalents were excluded from the net loss per share computations, as their
      effect is antidilutive. Common stock equivalents could potentially dilute basic
      earnings per share in future periods if the Company generates net income. At
      December 31, 2005 and 2004, there were 3,410,090 and 4,405,115 warrants issued,
      respectively, to purchase common stock. At December 31, 2005 and 2004, there
      were 1,946,431 and 1,574,375 options issued to purchase common stock,
      respectively. At December 31, 2005 and 2004, there were 3,173,252 and 3,268,295
      preferred shares, respectively, convertible to 5,536,502 and 5,712,795 common
      shares. At December 31, 2005 and 2004, there were outstanding debentures
      convertible into 3,145,455 and 3,327,273 common shares which may dilute future
      EPS (see note 10).




PRINCIPLES
      OF CONSOLIDATION: The consolidated financial statements include the accounts
      of
      the Company and its wholly owned operating subsidiary, SinoFresh Corporation.
      All inter-company balances and transactions have been eliminated in
      consolidation.




RECLASSIFICATIONS:
      Certain amounts in the 2004 financial statements have been reclassified to
      conform to the 2005 presentation.




*Recent
      Accounting Pronouncements*




In
      March
      2004, the Financial Accounting Standards Board (FASB) approved the consensus
      reached on the Emerging Issues Task Force Issue No. 03-1 (EITF 03-1), "The
      Meaning of Other-Than Temporary Impairment and Its Application to Certain
      Investments." The objective of EITF 03-1 is to provide guidance for identifying
      other-than-temporarily impaired investments. EITF 03-1 also provides new
      disclosure requirements for investments that are deemed to be temporarily
      impaired. In September 2004, FASB issued a FASB Staff Position (FSP) EITF 03-1-1
      that delays the effective date of the measurement and recognition guidance
      in
      EITF 03-1 until further notice. The disclosure requirements of EITF 03-1 are
      effective with this annual report for fiscal 2005. Once the FASB reaches a
      final
      decision on the measurement and recognition provisions, the Company will
      evaluate the impact of the adoption of the accounting provisions of EITF
      03-1.





In
      December 2004, the FASB issued Statement of Financial Accounting Standard (SFAS)
      No. 123R, "Share-Based Payment." SFAS No. 123R requires employee stock options
      and rights to purchase shares under stock participation plans to be accounted
      for under the fair value method, and eliminates the ability to account for
      these
      instruments under the intrinsic value method prescribed by Accounting Principles
      Board (APB) Opinion No. 25, and allowed under the original provisions of SFAS
      No. 123. SFAS No. 123R requires the use of an option pricing model for
      estimating fair value, which is amortized to expense over the service periods.
      The requirements of SFAS No. 123R are effective for fiscal periods beginning
      after December 15, 2005. If the Company had applied the provisions of SFAS
      No.123R to the financial statements for the period ending December 31, 2005
      and
      2004, net loss would have increased by approximately $165,000 and $520,000,
      respectively. SFAS No. 123R allows for either prospective recognition of
      compensation expense or retrospective recognition, which may be back to the
      original issuance of SFAS No. 123 or only to interim periods in the year of
      adoption. The Company anticipates adopting the prospective method beginning
      in
      the first quarter of 2006.


-38-





In
      November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
      of
      ARB No. 43, Chapter 4." "SFAS No. 151 amends the guidance in ARB No. 43,
      "Inventory Pricing," for abnormal amounts of idle facility expense, freight,
      handling costs, and wasted material (spoilage) requiring that those items be
      recognized as current-period expenses regardless of whether they meet the
      criterion of "so abnormal." This statement also requires that allocation of
      fixed production overheads to the costs of conversion be based on the normal
      capacity of the production facilities. The statement is effective for inventory
      costs incurred during the fiscal years beginning after June 15, 2005. Management
      does not expect this statement to have a material impact on the Company's
      consolidated financial position or results of operations.





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets,
      an amendment of APB Opinion No. 29." APB Opinion No. 29, "Accounting for
      Nonmonetary Transactions," is based on the principle that exchanges of
      nonmonetary assets should be measured based on the fair value of the assets
      exchanged. SFAS No. 153 amends APB Opinion No. 29, eliminating the exception
      to
      fair value accounting for nonmonetary exchanges of similar productive assets
      and
      replaces it with general exception to fair value accounting for nonmonetary
      exchanges that do not have commercial substance. A nonmonetary exchange has
      commercial substance if the future cash flows of the entity are expected to
      change significantly as a result of the exchange. The statement is effective
      for
      nonmonetary asset exchanges occurring in fiscal periods beginning after June
      15,
      2005. Management does not expect this statement to have a material impact on
      the
      Company's consolidated financial position or results of operations.




In
      March
      2005, FASB issued Interpretation No. 47 (FIN 47) to clarify the guidance
      included in SFAS No. 143, “Accounting for Asset Retirement Obligations”. FIN 47
      requires companies to recognize a liability for the fair value of a legal
      obligation to perform asset retirement activities that are conditional on a
      future event if the amount can be reasonably estimated. If amounts cannot be
      reasonably estimated, certain disclosures will be required about the
      unrecognized asset retirement obligations. FIN 47 was adopted by the Company
      in
      2005. Adoption of this statement did not have a material impact on the Company’s
      consolidated financial position.




In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections -
      a replacement of APB No. 20 and SFAS No. 3”. The pronouncement requires that all
      voluntary changes in accounting principle be reported by retrospectively
      applying the principle to all prior periods that are presented in the financial
      statements. The statement is effective for fiscal years beginning after December
      15, 2005. The Company’s financial position, results of operations or cash flows
      will only be impacted by SFAS No. 154 if it implements changes in accounting
      principles that are addressed by the standard or corrects accounting errors
      in
      future periods.




**NOTE
      2: Inventories**




Inventories
      at December 31, 2005 consisted of the following:




Finished
                Product - nasal spray
              Finished
                Product - throat spray
            
            $
            45,651
              102,900Less:
                Allowance for excess inventory
            
            
            (35,550
            )Net
                inventory
            
            $
            113,001





-39-




The
      Company has an agreement with a third party, who is a registered Federal Drug
      Administration and a cGMP (current Good Manufacturing Practices) qualified
      manufacturer, to manufacture its products. This agreement expires in August
      2008
      unless terminated earlier by either party with 90 days notice.




**NOTE
      3: Furniture and Equipment**




Furniture
      and equipment at December 31, 2005 summarized by major classification is as
      follows:




Furniture
                and Fixtures
            
            $
            75,485Computer
                Equipment
            
            
            73,055Warehouse
                Equipment
            
            
            9,267Less:
                Accumulated Depreciation
            
            
            (78,635
            )$
            79,172




Furniture
      and equipment included computer and warehouse equipment of approximately
      $115,000 acquired under capital lease arrangements at December 31, 2005.
      Depreciation expense for capitalized furniture and equipment was approximately
      $23,000 and $22,000 for the years ended December 31, 2005 and 2004,
      respectively.




**NOTE
      4: Patents**




Patents
      as of December 31, 2005 consist of the following:




Patents
            
            $
            3,000,000Less:
                Accumulated Amortization
            
            
            (711,522
            )$
            2,288,478





-40-




Patents
      are being amortized over 13 years based on the estimated remaining legal life
      as
      of the date of the acquisition of such patents. Amortization expense was
      approximately $231,000 for each of the years ended December 31, 2005 and 2004,
      respectively.




The
      estimated aggregate amortization expense for patents for each of the succeeding
      five calendar years is approximately as follows:




2006
            $
                231,0002007
            $
                231,0002008
            $
                231,0002009
            $
                231,0002010
            $
                231,000







The
      original valuation of the Company's patents was preformed by an independent
      valuation specialist and involved the use of estimates related to the fair
      value
      of the patents. As of December 31, 2005, the Company has evaluated it patents
      and has determined that there is no impairment in such asset value **.**




**NOTE
      5: Convertible Debentures and Capital Leases**




On
      December 7, 2004, the Company obtained financing in the total amount of
      $1,830,000 through the sale of two-year Senior Secured 6% Convertible Debentures
      (the "Debentures") to various institutional and private investors. The
      Debentures, which mature two years from the date of issuance, are collateralized
      by all of the assets of the Company and its operating subsidiary, SinoFresh
      Corporation (including the Company's patents and trademarks); and, the
      Debentures are convertible at a conversion price of $.55 per share, subject
      to
      certain anti-dilution provisions contained in the terms of the Debentures (see
      note 10). The Company reserved the right to require conversion of the Debentures
      at any time after an effective registration statement if the closing bid price
      of the Company's stock exceeds 300% of the conversion price then in effect
      for a
      period of 20 consecutive trading days. Interest is payable quarterly in arrears
      in cash; however, the Company may make interest payments with common stock
      so
      long as the market price of the common stock at such time is at least 115%
      of
      the then effective conversion price. The Company's subsidiary, SinoFresh
      Corporation, entered into a guaranty agreement with the investors, guaranteeing
      the Company's performance under the financing documents.




As
      an
      inducement to the Debenture holders, 1,663,645 warrants were issued at an
      exercise price of $0.60. Debenture proceeds allocated to these warrants totaled
      $610,000 and are reflected as a debt discount against the value of the total
      Debenture proceeds (see note 6). The debt discount is being amortized to
      interest expense over the 24-month term of the Debentures.


-41-




In
      connection with the debentures, the Company issued 320,000 warrants to a
      placement agent. These warrants were valued at approximately $268,000 and are
      being amortized to interest expense over the 24-month term of the debentures.
      The Company also paid approximately $142,000 for placement agent and other
      closing costs related to the Debentures. These costs have been recorded as
      deferred debt issuance costs and are being amortized to interest expense over
      the 24 month term of the Debentures.




In
      accordance with Emerging Issues Task Force Issue Nos. 98-5 and 00-27, the
      convertible debentures were deemed to contain a beneficial conversion feature.
      The beneficial conversion feature for the debenture transaction was estimated
      to
      be approximately $1,600,000; however, the recorded amount was limited to the
      proceeds of the issuance, less the allocated value of warrants, or $1,220,000.
      Due to the Debentures being immediately convertible, the beneficial conversion
      feature was fully expensed to interest expense as of the date of
      issuance.




Under
      the
      debentures, we are prohibited from taking certain corporate actions without
      the
      written consent of the holders of the debentures, including the making of
      distributions on our capital stock; the redemption or repurchase of our
      securities; the creation of any liability or lien on our assets except
      borrowings existing or committed on December 6, 2004, obligations to trade
      creditors or financial institutions incurred in the ordinary course of business,
      and loans to repay the debentures; the sale or other disposition of any
      significant portion of our assets outside of the ordinary course of business;
      the loaning or the advancing of any funds or credit, except in connection with
      any such items in existence or committed on December 6, 2004, or made in the
      ordinary course of business, or that are not in excess of $50,000 if made
      outside the ordinary course of business; and create any contingent liabilities
      except those that are in existence on December 6, 2004 or are made in the
      ordinary course of business. At December 31, 2005, long-term debt consisted
      of
      the following:




6%
                Secured convertible debentures
            
            $
            1,730,000Unamortized
                debt discounts
            
            
            (264,306
            )Capital
                lease obligations
            
            
            61,660$
            1,527,354Less
                current portion
            
            
            (1,489,439
            )$
            37,915


Future
                minimum maturities of notes payable are as follows:




Year
                Ended2006
            $
                1,489,4392007
            $
                23,3962008
            $
                14,519





-42-


**NOTE
      6: Stockholders' Equity**




**Common
      Stock**




The
      holders of SinoFresh's common stock are entitled to equal dividends and
      distributions per share with respect to the common stock when, as and if,
      declared by the board of directors from funds legally available therefore.
      No
      holder of any shares of common stock has a pre-emptive right to subscribe for
      any of our securities, nor are any common shares subject to redemption or
      convertible into other securities. Upon our liquidation, dissolution or
      winding-up, and after payment of creditors and preferred shareholders, if any,
      our assets will be divided pro rata on a share-for-share basis among the holders
      of the shares of common stock. Each share of the common stock is entitled to
      one
      vote with respect to the election of any director or any other matter upon
      which
      shareholders are required or permitted to vote. We have authorized 500,000,000
      shares of no par value common stock. As of December 31, 2005, there are
      14,505,229 shares issued and outstanding.




During
      2005, the Company issued 50,000 restricted common shares in the settlement
      of
      certain pending litigation. In addition, 13,793 Series A preferred shares were
      converted into 13,793 shares of common stock, 81,250 Series C preferred shares
      were converted into 162,500 shares of common stock and $100,000 in convertible
      debentures were converted into 181,816 shares of common stock.




**Preferred
      Stock**




Our
      Articles of Incorporation authorize the issuance of up to 200,000,000 shares
      of
      "blank check" preferred stock with such rights and preferences as our board
      of
      directors, without further shareholder approval, may determine from time to
      time. Of these authorized preferred shares, SinoFresh has designated 858,170
      shares as Series A preferred stock, 1,500,000 shares as Series B preferred
      stock, and 1,250,000 shares as Series C preferred stock. All preferred stock
      ranks senior to common stock as to payment of dividends and distribution of
      assets. Series A and B preferred stock ranks junior to Series C preferred stock,
      and Series A preferred stock ranks junior to Series B preferred stock, as to
      payment of dividends and distribution of assets. All three series of preferred
      stock have a liquidation value of $2.00 per share. Series A preferred shares
      are
      convertible into common stock on a one-for-one basis, while Series B and C
      preferred shares are convertible on a two-for-one basis, and, all have voting
      rights equivalent to the common stock into which they are convertible. In
      September 2004, the shares of common stock underlying the outstanding preferred
      stock became eligible for resale under Rule 144.




**Convertible
      Debentures**




As
      of
      December 31, 2005, the Company had $1,730,000 in outstanding debentures
      convertible into 3,145,455 shares of common stock (see notes 5 and
      10).




-43-


**Warrants
      and Stock Options**




*Warrants*




In
      connection with the debenture financing, we issued to the debenture holders
      and
      a placement agent warrants to purchase 1,663,645 and 320,000 shares of common
      stock, respectively. The warrants have an exercise price of $0.60 and $0.55
      per
      share, respectively, and expire on December 6, 2009. The warrants contain
      anti-dilution provisions under which the number of shares issuable upon exercise
      of the warrants and the exercise price will be adjusted upon the issuance of
      common stock or securities convertible into or exercisable for common stock
      at
      prices lower than the then effective exercise price of the warrants, the
      occurrence of stock splits, stock distributions, and other corporate events.




The
      Company issued warrants to two service providers in fiscal 2005 for a total
      of
      112,000 shares of common stock., with exercise price ranging from $0.55 to
      $1.00
      per share. The first warrant for 100,000 shares has a term of two years and
      immediate vesting at an exercise price of $1.00 and the other warrant for 12,000
      shares has a term of five years and vests immediately at an exercise price
      of
      $0.55. Both warrants contain registration rights. These warrants were valued
      at
      approximately $23,000.




We
      have
      outstanding additional warrants to purchase a total of 1,314,445 shares of
      common stock. The warrants were issued in private placements and to consultants
      and vendors in respect of services. The warrants have exercise prices ranging
      from $0.29 to $7.00 per share, and expire at varying times from June, 2007
      through September, 2009. The warrants contain registration rights.




The
      weighted average exercise price of the Company’s 3,410,090 outstanding warrants
      as of December 31, 2005 is $1.60.




*Stock
      Options*




The
      Company issued options to three service providers in fiscal 2005 to purchase
      a
      total of 120,000 shares of common stock, with exercise prices ranging from
      $0.60
      to $1.00. These options have vesting periods ranging from immediate to one
      year
      and expire in five years. Also in 2005, we restructured a previously issued
      option, resulting in a reduction in exercise price from $1.00 to $0.55 and
      an
      increase in common shares to be acquired with this option from 27,500 to
      55,556.




We
      have
      additional outstanding options to purchase 242,125 shares of common stock to
      independent consultants at exercise prices ranging from $1.00 to $1.50 per
      share. All of these options are currently exercisable and expire at varying
      times between September 1, 2008 and July 7, 2009.




The
      weighted average exercise price of the Company’s 417,681 outstanding non-plan
      stock options as of December 31, 2005 is $0.84.


-44-


*Plan
      Stock Options*




We
      have
      reserved for options under our 2002 Stock Option Plan 3,000,000 shares of common
      stock. As of December 31, 2005, there were outstanding options under the Plan
      for 1,528,750 shares of common stock, at exercise prices ranging from $0.25
      to
      $1.70 per share.




Plan
      stock option activity was as follows during the years ended December 31, 2005
      and 2004.




Options
            
            Weighted
                Average
              Exercise
                PriceOutstanding
                at December 31, 2003
            
            
            831,000
            
            $
            1.00Options
                granted
            
            
            555,000
            
            $
            1.03Exercised
            
            
            --
            
            
            --Expired
                or cancelled
            
            
            (81,250
            )
            $
            1.00Outstanding
                - December 31, 2004
            
            
            1,304,750
            
            $
            1.01Options granted
            
            
            266,500
            
            $
            0.51Exercised
            
            
            --
            
            
            --Expired or cancelled
            
            
            (42,500
            )
            $
            0.97Outstanding
                - at December 31, 2005
            
            
            1,528,750
            
            $
            0.92Exercisable
                as of December 31, 2005
            
            
            998,084
            
            $
            0.99





The
      range
      of exercise prices for options outstanding at December 31, 2005 was $0.25 to
      $1.70. The following table summarizes information about options outstanding
      at
      December 31, 2005:





**Exercise**
              **Price**
            **Number
                of Shares**
            **Weighted
                Average**
              **Contractual
                Life (in years)**
            **Exercisable
                Options**$0.25
            50,000
            4.83
            0$0.57
            214,000
            4.08
            0$0.75
            150,000
            3.83
            100,000$1.00
            1,014,750
            2.78
            864,750$1.33
            50,000
            3.33
            16,667$1.70
            50,000
            3.00
            16,6671,528,750
            3.15
            998,084





-45-


**NOTE
      7: Related Party Information**




A
      director of the Company is the principal owner of a law firm that provided
      services to the Company in 2004. The expenses incurred to that law firm were
      $20,000 for the year ended December 31, 2004. As of December 31, 2005, the
      Company had $100,000 recorded in accounts payable and accrued liabilities due
      to
      this firm.




The
      Company leases its current facility from an entity currently controlled by
      one
      of the Company's officers. Rent related to this facility totaled $77,000 for
      each of the years ended December 31, 2005 and 2004 (see note 8). As of December
      31, 2005, the Company had approximately $13,000 recorded in accounts payable
      due
      to this entity.




Prior
      to
      June 2004, the Company rented a condominium, on a month to month basis, from
      an
      officer and director for the amount of $1,250 per month. The Company utilized
      the condominium for corporate housing. Total rent expensed in 2004 was $6,250.




**NOTE
      8: Commitments and Contingencies**




The
      Company entered into a five-year agreement to lease a new headquarters facility
      for a base rate of $5,998 per month plus sales tax, effective April 2003, but
      did not move in or incur expenses until August 2003. The property is leased
      from
      a company owned by an officer/shareholder of the Company. The lease provides
      for
      two additional five-year terms with the Company. The Company expensed
      approximately $77,000 for each of the years ended December 31, 2005 and 2004,
      related to this lease.




The
      Company is subject to operating leases for the use of certain office equipment.
      Rental expense under these leases, amounted to approximately $11,000 for both
      the years ended December 31, 2005 and 2004, respectively. Future minimum
      noncancellable lease payments under the Company’s operating leases are as
      follows:




2006
            $79,000


2007
            $72,000


2008
            $42,000




Effective
      March 1, 2003, the Company entered into a three-year master broker agreement
      with a national company. Under this contract the master broker became the
      Company's exclusive broker, with minor exception, to all retail accounts in
      the
      United States Effective August 31, 2005, this agreement was terminated subject
      to the condition that the Company fulfills a payment plan for amounts due as
      of
      August 31, 2005. If the Company fails to make the payment, then the original
      terms of the agreement will be reinstated. The Company incurred approximately
      $197,000 and $197,000 of fees for broker related services for the year ended
      December 31, 2005 and 2004, respectively, and are included in cost of goods
      sold
      in the accompanying consolidated statements of operations.




The
      Company has an employment agreement with its Chief Executive Officer (CEO),
      which provides, among other things, that if the Company issues additional
      shares, the CEO shall receive options for the purchase of shares of the Company
      such that the CEO shall maintain no less than 15% ownership of the Company.


-46-




On
      February 20, 2004, a law suit was filed in the U.S. District Court, Middle
      District of Florida, Ft. Myers Division, Case No. 04-CV-95-FTM-29 SPC, styled
      Hawkins, et al. vs. Charles Fust, et al., and an amended complaint was filed
      on
      March 3, 2004 which merely changed allegations directed toward the location
      where the action may be heard and noted that SinoFresh is a Florida corporation.
      This legal proceeding was moved to the U.S. District Court located in Tampa,
      Florida. The plaintiffs include Stephen Bannon and David Otto, directors of
      SinoFresh, as well as other purported shareholders of SinoFresh. The defendants
      are Charles Fust, Stacey Maloney -Fust, P. Robert DuPont, Russell R. Lee, III
      (the company's former CFO), and SinoFresh HealthCare, Inc. The complaint
      asserted claims based on federal securities law violations and breach of
      fiduciary duty.




In
      December 2005, the parties to the complaints entered into two settlement
      agreements resolving all outstanding issues in the litigation. The first
      settlement agreement was entered into among all of the plaintiffs and defendants
      and contained the following principal provisions: (i) the forgiveness by the
      law
      firm of Greenberg Traurig P.A of all outstanding legal fees owed by the Company
      to Greenberg Traurig (approximately $240,000), (ii) the payment of $200,000
      by
      Greenberg Traurig to the Company, (iii) the Company's issuance of 37,500 shares
      of common stock to certain of the plaintiffs, and (iv) the release of all claims
      between the parties to the litigation.




The
      second settlement agreement was entered into between Company and the law firm
      of
      David B. Haber, P.A. ("Haber"), the counsel for certain of the plaintiffs.
      The
      Haber Settlement Agreement contains the following principal provisions: (i)
      the
      payment of $25,000 by the Company to Haber, (ii) the Company's issuance of
      120,000 shares of common stock to Haber, (iii) the Company's issuance to Haber
      of options to purchases 40,000 shares of common stock (which options can be
      exercised immediately at an exercise price of $0.25 per share), and (iv) the
      release of claims of the plaintiffs and Haber against the Company for
      reimbursement of legal fees.




The
      settlements reached by the parties to this lawsuit were accepted by the Court
      and the case was ordered by the Judge to be closed on February 2,
      2006.




In
      2003,
      the Company issued 10,768,490 shares of common stock, 858,170 shares of Series
      A
      preferred stock, 1,500,000 shares of Series B preferred stock, and 1,218,711
      shares of Series C preferred stock in connection with the acquisition by merger
      of the Company's predecessor. The Company has been unable to obtain
      documentation which conclusively establishes that the issuance of these shares
      was exempt from registration under the Securities Act of 1933. Because this
      documentation is not available, it is possible that the Company's issuance
      of
      shares in connection with the merger may not have been in compliance with the
      registration provisions of the federal and state securities laws. As a result,
      the Company could be exposed to claims for rescission by shareholders who
      received shares in the merger. Although the Company would vigorously defend
      against any such actions, litigation may be costly and there is no assurance
      of
      the outcome. If the Company were not successful in the defense of these claims,
      the cost of repurchasing the shares could be material.




From
      time
      to time, the Company is subjected to other litigation or proceedings in
      connection with its business, as either a plaintiff or defendant. There are
      no
      such pending legal proceedings to which the Company is a party that, in the
      opinion of management, is likely to have a material adverse effect on the
      Company's business, financial condition or results of operations.




**NOTE
      9: Income Taxes**




At
      December 31, 2005, net operating losses available to be carried forward for
      federal income tax purposes are approximately $10 million expiring in various
      amounts through 2025. Utilization of SinoFresh's net operating losses may be
      subject to substantial annual limitation in the event of ownership changes
      under
      regulations of the Internal Revenue Code and similar state provisions. Such
      annual limitation could result in the expiration of the net operating loss
      before utilization.


-47-




The
      Company's tax expense (benefit) differs from the "expected" tax expense
      (benefit) as follows:




**2005**
            ****
            **2004**Computed
                "expected" tax expense (benefit)
            
            $
            (670,624
            )
            $
            (1,394,673
            )Losses
                for which no benefit is recorded
            
            
            689,949
            
            
            1,395,097Non-deductible
            
            
            19,325
            
            
            (453,879
            )$
            -0-
            
            $
            -0-





A
      valuation allowance is provided when it is more likely than not that some
      portion or all of the deferred tax assets will not be realized. The Company
      has
      established a valuation allowance for the entire deferred tax asset due to
      recurring losses since the Company's inception.







**2005**
            
            ******2004**Deferred
                tax assets:Net
                operating loss carry forwards
            
            $
            3,260,236
            
            $
            2,563,347Less:
                valuation allowance
            
            
            (3,260,236
            )
            
            (2,563,347
            )Net
                deferred tax asset
            
            $
            -0-
            
            $
            -0-





**NOTE
      10: Subsequent Events**




In
      February 2006, the Company issued a total of 420,000 common shares to certain
      service providers at an agreed value of $0.25 per share. The Company issued
      these shares under a registration statement on Form S-8. As a result of the
      issuance of these shares, and due to the anti-dilution provisions of the
      Company’s outstanding debentures, the conversion price and number of shares
      issuable under the debentures have been adjusted. In particular, the conversion
      price of the remaining $1,730,000 debentures has been reduced from $0.55 per
      share to $0.25 per share and the number of shares issuable under these
      debentures has been increased from 3,145,455 shares to 6,920,000 shares. The
      adjustment to the conversion price had no affect on bond discount or interest
      expense related to the beneficial conversion feature, which was recorded in
      2004.


-48-


**ITEM
      8.****CHANGE****S
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE******




Not
      Applicable.




**ITEM****8A.****CONTROLS
      AND PROCEDURES******




As
      of the
      end of the period covered by this report, SinoFresh carried out an evaluation
      of
      the effectiveness of the design and operation of SinoFresh's disclosure controls
      and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange
      Act of 1934). This evaluation was carried out under the supervision and with
      the
      participation of SinoFresh's management, including SinoFresh's Chief Executive
      Officer and Chief Financial Officer, who concluded that SinoFresh's disclosure
      controls and procedures were effective as of December 31, 2005.




During
      the fourth fiscal quarter of the period covered by this report, there were
      no
      changes in SinoFresh's internal control over financial reporting that materially
      affected or is reasonable likely to materially affect SinoFresh's internal
      control over financial reporting.




**ITEM
      8B.****OTHER INFORMATION******




None





-49-




**PART
      III** ****




**ITEM
                9.**
            **DIRECTORS
                AND EXECUTIVE OFFICERS******




SinoFresh's
      directors and executive officers are as follows:




**Name**
            **Position**
            **Appointment**Charles
                A. Fust
            Chairman,
                Chief Executive Officer, Director
            November,
                2002Scott
                M. Klein
            Chief
                Financial Officer, Secretary
            November,
                2004Stacey
                Maloney-Fust
            Senior
                Vice President, Assistant Secretary, Director
            September,
                2003P.
                Robert DuPont
            Director
            November,
                2002Stephen
                Bannon
            Director
            September,
                2003David
                Otto
            Director
            October,
                2002


***Charles
      A. Fust, Chief Executive Officer (CEO) and Chairman of the Board of Directors.*** Mr.
      Fust,
      age 62, is a chemical engineer, whose research has resulted in various domestic
      and international patents, including the patents underlying the SinoFresh nasal
      product. Mr. Fust began the development of SinoFresh's first product in 1989.
      His expertise in the health care community has provided him with the opportunity
      to chair various health care boards, mainly Otorhinolaryngology related. Mr.
      Fust's business background covers ownership and management in international
      companies. Mr. Fust has been the Chief Executive Officer and Chairman of
      SinoFresh Laboratories, LLC from 1999 until acquired in 2002, Chief Executive
      Officer and Chairman of SinoFresh from November 2002 to the present. He holds
      a
      bachelor degree in Chemical Engineering from Auburn University and has a
      professional affiliation with the American Association of Pharmaceutical
      Scientists. Mr. Fust is the spouse of Stacey Maloney-Fust.




***Scott
      M. Klein, Chief Financial Officer and Secretary.*** Mr.
      Klein, age 42, has 20 years experience in financial administration for private
      industry and in public accounting. Mr. Klein joined SinoFresh in April, 2004
      as
      a Controller and was promoted to Chief Financial Officer in November, 2004.
      Prior to joining SinoFresh, Mr. Klein served three years as the CFO for ParView,
      Inc., a privately held manufacturer of GPS technology for the golf industry.
      From 1992 to 2001, Mr. Klein was the Corporate Controller for Elcotel, Inc.,
      a
      publicly-held manufacturer of computerized "smart" pay telephones. Prior to
      his
      private industry experience, Mr. Klein spent five years as an auditor in public
      accounting at both Ernst & Young and Grant Thornton. Mr. Klein is a
      Certified Public Accountant, licensed in the State of Florida and has a degree
      in Managerial Accounting from the University of Wisconsin - Stevens
      Point.


-50-




***Stacey
      Maloney-Fust, Senior Vice President, Assistant Secretary, Director.*** Ms.
      Maloney-Fust, age 41, joined SinoFresh HealthCare, Inc. in July 2003. She has
      15
      years experience in the financial industry. For several years in New York City
      she worked as an Executive Assistant for the President of AIG Global Investors,
      Inc., and as an Executive Assistant for the General Partner of Sandler Capital
      Management.  Ms. Fust passed the NASD Series 7, 63, and 65 licensing
      examinations and became a Financial Advisor for Salomon Smith Barney and most
      formerly with UBS before starting with SinoFresh in the second half of 2003.
      Ms.
      Fust is currently enrolled in pre-med at the University of South Florida and
      is
      the wife of Charles Fust.




***P.
      Robert DuPont, Director.*** Mr.
      DuPont, age 41, has over twenty years of experience in the bio-pharmaceutical
      and life sciences industries. Mr. DuPont resigned his position as Executive
      Vice
      President of SinoFresh in August 2005 in order to start up a new company which
      provides specialized coating materials designed to detect hazardous material
      leaks. Mr. DuPont was with SinoFresh and its predecessors since June of 2001.
      Prior to joining SinoFresh, Mr. DuPont founded and acted in the capacity of
      CEO
      of UltraPure Group Limited. UltraPure Group Limited provided integrated services
      to multi-national pharmaceutical companies, which included design services,
      regulatory consultation, and contract staffing. He founded the company in 1993
      and sold his interest in the company in 2001. He is a member of the
      International Society of Pharmaceutical Engineers and has presented various
      lectures on the topic of pharmaceutical process design. Mr. DuPont is also
      a
      member of the American Association of Pharmaceutical Scientists.




***Stephen
      Bannon, Director.*** Mr.
      Bannon, age 52, has been a director of SinoFresh since September 2003. He is
      currently associated with American Vantage Media. Prior to his affiliation
      with
      American Vantage Media, Mr. Bannon was employed at Jeffries & Company, Inc.
      during the period July 2000 to April 2002 and with "The Firm" from May 2002
      to
      March 2003. Prior to this, Mr. Bannon was employed by SG Cowan Securities
      Corporation from July 1998 to March 2000. Mr. Bannon received his MBA from
      Harvard University. He received his undergraduate degree from Virginia
      Polytechnical Institute's College of Architecture and has a graduate degree
      in
      Government from Georgetown University.




***David
      Otto, Director.*** Mr.
      Otto,
      age 47, has been a director of SinoFresh since September 2003. In July of 1999,
      Mr. Otto founded The Otto Law Group, PLLC, in Seattle, Washington. Mr. Otto
      is
      currently a member of the Board of Directors of Vocalscape Networks, Inc.,
      Renaissance Window Fashions, Inc., Avisere, Inc., TechAlt, Inc., and Saratoga
      Capital Partners, Inc.  Mr. Otto is admitted to practice law in New York
      and Washington.  Mr. Otto graduated from Harvard University in 1981 with
      his B.A. in Government and was the recipient of the Harvard-Shrewsbury
      Fellowship, and his J.D. from Fordham University School of Law in 1987.




Our
      directors are elected at the annual meeting of the shareholders and serve until
      their successors are elected and qualified, or their earlier resignation or
      removal. Officers are appointed by the board of directors and serve at the
      discretion of the board of directors or until their earlier resignation or
      removal.




-51-


**Director's
      Compensation**




The
      Company does not currently have a compensation plan for persons serving as
      directors of the Company. However, in March 2006, the board of directors voted
      to approve directors fees for services performed prior to 2006, in the amount
      of
      $42,500, payable in the form of common stock of the Company.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Securities Exchange Act of 1934 requires directors and executive
      officers, and persons who own 10% or more of SinoFresh common stock, to file
      reports of ownership and changes in ownership with the SEC. Officers, directors
      and greater than 10% stockholders are required to furnish the Company with
      copies of all Section 16(a) forms they file. Based solely on a review of the
      copies of such forms furnished to the Company, SinoFresh has determined that
      a
      form 4 related to the grant of stock options was filed late for our Chief
      Executive Officer, Chief Financial Officer, Senior Vice President and the
      Executive Vice President.




**Code
      of Ethics for Chief Executive Officer and Senior Financial Officers**




The
      Company has adopted a code of ethics for the CEO and Senior Financial Officers
      (Code of Ethics) which is required to be signed by each such officer, and is
      maintained on file by the Company. A copy of the Code of Ethics will be provided
      to you, free of charge, upon your written request to the Company sent to the
      attention of Investor Relations, SinoFresh HealthCare, Inc., 516 Paul Morris
      Drive, Englewood, Florida 34223.




If
      the
      Company makes any substantive amendments to the Code of Ethics, or grants any
      waiver, including any implicit waiver, from a provision of the Code of Ethics
      to
      the Chief Executive Officer or the Chief Financial Officer, the Company will
      disclose the nature of such amendment or waiver in a report on Form 8-K.




**Audit
      Committee and Audit Committee Financial Expert**




Three
      members of the Company's Board of Directors, Charles Fust, P. Robert DuPont
      and
      Stacey Maloney-Fust, currently serve as the audit committee. The Audit Committee
      does not currently have a financial expert. It is the company's goal to add
      at
      least one director who is a financial expert, but the company has been unable
      to
      identify an acceptable candidate who meets this requirement who is willing
      to
      serve as director.




**ITEM
      10.****EXECUTIVE
      COMPENSATION******




The
      following table sets forth all the compensation earned by the Company's Chief
      Executive Officer and each other officer who earned greater than $100,000 in
      total salary and bonuses during the 2005 fiscal year (collectively, the "Named
      Executive Officers").


-52-


**SUMMARY
      COMPENSATION TABLE**





**Annual
                Compensation****(1)**
            **Long-Term**
              **Compensation
                Awards****Name
                And Principal**
            **Fiscal**
            
            **Securities**
            **All
                Other****Position**
            **Year**
            **Salary**
            **Bonus**
            **Underlying
                Options**
            **Compensation**Charles
                A. Fust
            12/31/05
            $180,000
            $100,000
            75,000
            $14,160Chairman
                and Chief
            12/31/04
            180,000
            -0-
            -0-
            15,286Executive
                Officer
            12/31/03
            150,388
            -0-
            -0-
            14,744Scott
                M. Klein**(2)**
            12/31/05
            110,000
            25,000
            50,000
            -0-Chief
                Financial
            12/31/04
            62,141
            10,000
            200,000
            -0-Officer
                and Secretary
            12/31/03
            -0-
            -0-
            -0-
            -0-


___________________________





(1)
            The
                amounts reflected in the above table as "annual compensation" do
                not
                include any amounts for perquisites and other personal benefits extended
                to the Named Executive Officers. The aggregate amount of such compensation
                for the Named Executive Officer is less than 10% of the total annual
                salary and bonus.


(2)
            Mr.
                Klein served as the Company's Controller from April 2004 until assuming
                the Chief Financial Officer position in November
                2004.




-53-


**Stock
      Options Granted in Fiscal 2005**




The
      following table sets forth certain information concerning grants of options
      made
      during fiscal 2005 to the Named Executive Officers.




**Name**
            
            **Number
                of Securities Underlying Options Granted**(#)
            
            **Percent
                of Total Options Granted to Employees in 2005**
            
            **Exercise
                or Base Price ($/SH)**
            
            **Grant
                Value Based on Black-Scholes Valuation Method**
            
            **Expiration
                Date**Charles
                A. Fust
            
            75,000
            
            28%
            
            $0.57
            
            $28,200
            
            1/31/10Scott
                M. Klein
            
            50,000
            
            19%
            
            $0.25
            
            $11,794
            
            11/1/10


**Aggregate
      Stock Option Exercises and Year-End Option Value Table**




The
      following table sets forth certain information concerning option exercises
      in
      fiscal 2005, the number of stock options held by the Named Executive Officers
      as
      of December 31, 2005 and the value (based on the fair market value of a share
      of
      stock at fiscal year-end) of in-the-money options outstanding as of such date.




**Number
                of Shares Acquired on**
            
            **Value**
            
            **Number
                of Unexercised**
              **Options
                Held at Fiscal Year-End(#)**
            
            **Value
                of Unexercised**
              **In-the-Money
                Options at Fiscal Year-End****(1)****Name**
            
            **Exercise
                (#)**
            
            **Realized
                ($)**
              **(1)**
            
            **Exercisable**
            
            **Unexercisable**
            
            **Exercisable**
            
            **Unexercisable**Charles
                A. Fust
            
            -0-
            
            N/A
            
            -0-
            
            75,000
            
            N/A
            
            N/AScott
                M. Klein
            
            -0-
            
            N/A
            
            116,667
            
            133,333
            
            N/A
            
            N/A


___________________________





(1)
            Options
                are in-the-money if the fair market value of the common stock exceeds
                the
                exercise price of the option. The closing sale price for the Company's
                common stock as reported by the NASDAQ Trading and Market Services
                on
                December 31, 2005 was $0.22 per
                share.





-54-


**Employment
      Agreements**




Charles
      Fust is employed as the Company's Chief Executive Officer under an employment
      agreement dated December 1, 2002. The employment agreement has a term of five
      years and is renewable upon mutual agreement of the parties. Under that
      agreement, he is entitled to a base salary, as adjusted, of $180,000 annually
      and 5.0% of net earnings before taxes. In addition, Mr. Fust is entitled to
      receive a car allowance of $1,000 per month. The agreement also provides that
      the Company and Mr. Fust enter into a stock option agreement under which he
      would be provided anti-dilution rights so that Mr. Fust's equity ownership
      of
      the Company, on a fully diluted basis, will be no less than 15% so long as
      the
      total outstanding shares on a fully diluted basis are less than 100,000,000.
      The
      agreement also prohibits Mr. Fust from competing with the Company for a period
      of three years upon cancellation of the employment agreement.




The
      Company has an employment agreement with Scott M. Klein, the Chief Financial
      Officer and Secretary, which provides for a 3-year term commencing as of
      November 1, 2004 with an annual salary of $110,000, increasing to $120,000
      on
      January 1, 2006 and $135,000 on January 1, 2007. In connection with the
      employment agreement, Mr. Klein was granted a 5-year option for 150,000 shares
      of common stock with an exercise price of $.75 per share (which was the closing
      sale price of the stock on November 1, 2004), vesting immediately as to 75,000
      shares and the remaining 75,000 shares will vest ratably over 3 years commencing
      on November 1, 2005. In addition, Mr. Klein will be granted additional 5-year
      options for 50,000 shares on November 1, 2005 and on November 1, 2006, each
      at
      an exercise price that is the closing sale price of the Company's common stock
      on such dates, and these additional options will vest ratably over three years
      commencing on the date of grant.




**** **Director's
      Compensation**




Directors
      received a fixed amount for attendance at each meeting. For 2004 and 2005,
      the
      Board approved the payment of $2,500 per calendar quarter to be paid to each
      of
      the outside Directors to be paid in the form of common stock. Directors may
      also
      serve the company in other capacities as an officer, agent or otherwise, and
      may
      receive compensation for their services in such other capacity. Board members
      are reimbursed for reasonable travel expenses.




**Stock
      Option Plan**




The
      Company's Compensation Committee and the Board of Directors currently administer
      the 2002 Stock Option Plan (Plan). The Plan provides for the grant of options
      (incentive and non-statutory), to officers, employees and independent
      contractors capable of contributing to the Company's performance. The Company
      has reserved an aggregate of 3,000,000 shares of common stock for grants under
      the Plan. Incentive stock options may be granted only to employees eligible
      to
      receive them under the Internal Revenue Code of 1986, as amended. As of December
      31, 2005, the Company had outstanding non-statutory options for 1,528,750 shares
      of the Company's common stock. These options have a term of five years from
      the
      date of grant, unless earlier terminated in accordance with the provisions
      of
      the Plan and applicable stock option agreements. The exercise prices of all
      of
      the options granted as of December 31, 2005 range from $0.25 to $1.70 per share.
      The options generally have scheduled vesting except for options for 451,000
      shares, which either vested immediately upon grant or were subsequently
      accelerated by the Board. Upon expiration or termination of unexercised options,
      the unpurchased shares subject to such options will again be available for
      purposes of the Plan.




-55-


**REPORT
      OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
      COMPENSATION**





**General**




During
      fiscal year 2005 and currently, Charles Fust, P. Robert DuPont and Stacey
      Maloney-Fust constitute the Compensation Committee. Mr. Fust and Ms.
      Maloney-Fust are employee-directors of the Company. Mr DuPont was an
      employee-director until his resignation as an employee in August 2005.




The
      Board
      of Directors, upon recommendations made by the Compensation Committee,
      determines option grants. The Board monitors corporate performance and its
      relationship to compensation for executive officers and makes determinations
      concerning matters of executive compensation. The Compensation Committee
      determines salaries and incentive cash bonuses for non-executive
      employees.





**Compensation
      Philosophy**




The
      Company has developed and implemented a compensation program that is designed
      to
      attract, motivate, reward and retain the broad-based management talent required
      to achieve the Company's business objectives and increase shareholder value.
      There are two major components of the Company's compensation program: base
      salary and incentives, each of which is intended to serve the overall
      compensation philosophy.




**Base
      Salary**




The
      Company's salary levels for executive officers, including its Chief Executive
      Officer, are intended to be consistent with competitive pay practices of
      similarly-sized companies within the industry. In determining executive
      officers' salaries, the board considers level of responsibility, competitive
      trends, the financial performance and resources of the Company, general economic
      conditions, as well as factors relating to the particular individual, including
      overall job performance, level of experience and prior service, ability, and
      knowledge of the job.


**Incentives**




Incentives
      consist of stock options and performance bonuses paid in cash. The board
      strongly believes that the compensation program should provide employees with
      an
      opportunity to increase their ownership and potential for financial gain from
      increases in the Company's stock price. This approach closely aligns the best
      interests of shareholders and, executives and employees. Therefore, executives
      and other employees are eligible to receive stock options, giving them the
      right
      to purchase shares of the Company's common stock at a specified price in the
      future. Currently, upon recommendations made by the Compensation Committee,
      the
      Board determines stock option grants. The grant of options is based primarily
      on
      an individual's past performance and potential future contribution to the
      Company's growth and profitability.


Respectfully
                submitted,
              
              THE COMPENSATION COMMITTEEBy:
            /s/ Charles
              A. FustCharles
              A. Fust By:
            /s/ P.
              Robert
              DuPontP.
              Robert DuPont By:
            /s/ Stacey
              Maloney-FustStacey
              Maloney-Fust


-56-


**ITEM
                11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS******




The
      following table sets forth certain information regarding the beneficial
      ownership of our shares of voting stock as of February 27, 2006 by: (i) each
      person who is known by us to beneficially own more than 5% of the issued and
      outstanding shares of common stock; (ii) the Chairman and Chief Executive
      Officer; (iii) the directors; and (iv) all of the executive officers and
      directors as a group. For purposes of the beneficial ownership calculations
      below, the Series A preferred stock, which is convertible into common stock
      on a
      1-for-1 basis, and the Series B and Series C preferred stock, which are
      convertible into common stock on a 2-for-1 basis are included on an as converted
      basis, such that the total issued and outstanding voting stock becomes
      20,661,731. Unless otherwise indicated, the persons named below have sole voting
      and investment power with respect to all shares beneficially owned by them,
      subject to community property laws where applicable.




**Name
                of Beneficial Owner****(1)(2)**
            **No.
                of shares**
            **Percentage**Charles
                A. Fust, Chairman and Chief Executive Officer
            7,934,734(3)
            38.26%Scott
                M. Klein, Chief Financial Officer, Secretary
            133,334(5)
            *Stacey
                Maloney-Fust, Senior Vice President and a Director
            58,334(10)
            *David
                Otto, Director(6)
            270,000
            1.31%Stephen
                Bannon, Director(7)
            425,000(8)
            2.05%P.
                Robert DuPont, Director
            424,000(4)
            2.04%Moty
                Hermon
            1,229,723(9)
            5.95%David
                N. Macrae Trust
            1,285,990(11)(12)
            6.03%David
                N. Macrae
            1,852,657(13)
            8.65%All
                officers and directors as a group (6 persons)
            9,187,068(14)
            43.57%


_____________________


*Represents
      less than 1% of all issued and outstanding voting stock of
      SinoFresh.




(1)  Unless
      otherwise noted, the address of each person or entity listed is c/o SinoFresh
      HealthCare, Inc., 516 Paul Morris Drive, Englewood, FL 34223.


(2)  Beneficial
      ownership is determined in accordance with the rules of the SEC and generally
      includes voting or investment power with respect to securities. Shares of common
      stock subject to options, warrants or convertible securities that are currently
      exercisable or exercisable within 60 days of February 27, 2006, are deemed
      outstanding for computing the percentage of the person holding such options,
      warrants or convertible securities but are not deemed outstanding for computing
      the percentage of any other person. Except as indicated by footnote and subject
      to community property laws where applicable, the persons named in the table
      have
      sole voting and investment power with respect to all shares of common stock
      shown as beneficially owned by them.


-57-


(3)  Represents
      4,851,400 shares of common stock owned by the Charles Fust Family Limited
      Partnership, for which a corporation Mr. Fust owns is the general partner;
      3,000,000 shares of common stock issuable upon conversion of 1,500,000 shares
      of
      Series B preferred stock held by the Charles Fust Family Limited Partnership,
      which shares of Series B preferred stock vote on an as converted basis; 25,000
      shares of common stock issuable pursuant to options exercisable within the
      next
      60 days; 5,000 shares of common stock owned by his spouse; and 53,334 shares
      of
      common stock issuable pursuant to options exercisable by his spouse, Stacey
      Maloney-Fust, within the next 60 days.


(4)  Represents
      250,000 shares of common stock, 10,000 shares of common stock issuable upon
      conversion of 10,000 shares of Series A preferred stock, and 164,000 shares
      of
      common stock issuable pursuant to options exercisable within the next 60
      days.


(5)  Represents
      133,334 shares of common stock issuable pursuant to options exercisable within
      the next 60 days.


(6)  Mr. Otto's
      address is 601 Union Street, Suite 4500, Seattle, WA 98101.


(7)  Mr. Bannon's
      address is 1819 Colorado Avenue, Santa Monica, CA 90404.


(8)  Represents
      375,000 shares of common stock and 50,000 shares of common stock issuable
      pursuant to options exercisable within the next 60 days.


(9)  Represents
      1,229,723 shares of common stock Mr. Moty Hermon has a right to acquire from
      Mr.
      Fust pursuant to a put option, which shares of stock have been deposited into
      escrow by Mr. Fust for the benefit of Mr. Hermon. Mr. Fust holds a proxy to
      vote
      the escrowed shares.


(10)  Represents
      5,000 shares of common stock and 53,334 shares of common stock issuable pursuant
      to option exercisable within the next 60 days. Excludes 7,934,734 beneficially
      owned by her spouse, Charles Fust, an executive officer and director of the
      Company.


(11)  Represents
      604,170 shares of common stock, 227,274 shares of common stock issuable pursuant
      to warrants exercisable within the next 60 days, and 454,546 shares of common
      stock issuable upon conversion of a debenture that is convertible within the
      next 60 days.


(12)  Mr.
      Macrae's address is 621 Casey Key Rd, Nokomis, FL 34275.


(13)  Represents
      500,000 shares of common stock, 66,667 shares of common stock purchase warrants
      that are exercisable within the next 60 days, and the following securities
      held
      by the David N. Macrae Trust for which Mr. Macrae is the trustee: 604,170 shares
      of common stock, 227,274 shares of common stock issuable pursuant to warrants
      exercisable within the next 60 days, and 454,546 shares of common stock issuable
      upon conversion of a debenture that is convertible within the next 60
      days.


(14)  Represents
      5,751,400 shares of common stock; 3,000,000 shares of common stock issuable
      upon
      conversion of 1,500,000 shares of Series B preferred stock; 10,000 shares of
      common stock issuable upon conversion of 10,000 shares of Series A preferred
      stock; and 425,668 shares of common stock issuable upon exercise of outstanding
      options that are exercisable within the next 60 days.




**ITEM
      12.****CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS******




SinoFresh
      leases its facility at 516 Paul Morris Drive, Englewood, Florida, from Fust
      Real
      Estate Ventures, LLC, which is owned 50% by Charles Fust, the Chairman and
      CEO,
      and 50% by Stacey Maloney-Fust, Senior Vice President, Assistant Secretary,
      and
      a member of our board of directors. Prior to an assignment, our lease was with
      DuPont and Fust Real Estate Ventures, LLC, which was owned 50% by P. Robert
      DuPont, the former Vice President of Research & Development and a current
      member of our board of directors, and 50% by Charles Fust, the Chairman and
      CEO.
      The lease has a 5-year term at a base rent of $5,998.00 per month (plus sales
      tax), effective April 2003. The lease provides for two additional five-year
      terms at the option of SinoFresh. As of December 31, 2005, the Company had
      $14,079 accrued for unpaid rent.


-58-




The
      Otto
      Law Group, PLLC, Seattle, Washington, represented the Company and SinoFresh
      -
      Delaware on legal matters and billed the Company for legal services pursuant
      to
      an engagement agreement. David Otto of The Otto Law Group, PLLC, is a
      shareholder and a member of the Board of Directors of the Company and was
      formerly the Company's General Counsel and Secretary. In fiscal 2005 and 2004,
      The Otto Law Group, PLLC billed the Company approximately $0 and $20,000,
      respectively for legal fees and expenses. There was $100,000 in outstanding
      fees
      payable to this entity as of December 31, 2005.




**ITEM
      13.****EXHIBITS
      AND REPORTS ON FORM 8-K******




**A.**
            **Exhibits**




The
      exhibits in the accompanying Exhibit Index are filed as part of this Report
      on
      Form 10-KSB or are incorporated by reference.




**B.**
            **Reports
                on Form 8-K**


Form
              Description
              Filing
                  Date8-K
              Press
                  Release: Third Quarter 2005 Financial
                  Results
              11/16/058-K
              Entry
                  into a Material Definitive Agreement,
                  Unregistered
              12/14/05Sales
                  of Equity Securities and Press Release related to
                  Same8-K
              Entry
                  into a Material Definitive Agreement and
                  Unregistered
              12/20/05Sales
                  of Equity Securities




**ITEM
      1****4.****PRINCIPAL
      ACCOUNTANT FEES AND SERVICES******




*Audit
      Fees*




The
      Company was billed by its accountants approximately $96,000 and $188,000 during
      the years ended December 31, 2005 and 2004, respectively for fees and expenses
      related to professional services rendered in connection with the year end audits
      of the consolidated financial statements and reviews of the quarterly
      consolidated financial statements.


-59-




*Audit-Related
      Fees*




The
      Company was not billed any additional fees that are not disclosed under audit
      fees in each of the last two calendar years for assurance and related services
      that are reasonably related to the performance of the audit or review of the
      Company's consolidated financial statements.




*Tax
      Fees*




Fees
      for
      tax compliance, tax advice and tax planning, including the preparation of
      certain tax returns for the years ended December 31, 2005 and 2004 were
      approximately $4,000 and $18,000, respectively.




*All
      Other Fees*




There
      have been no other material fees charged for accounting products or services
      other than those described above for the years ended December 31, 2005 and
      2004.




*Audit
      Committee Pre-Approval Process, Policies and Procedures*




The
      appointment of Moore Stephens Lovelace, P.A. was approved by the Board of
      Directors as the principal auditors for the Company. Three members of the
      Company's Board of Directors, Charles Fust, P. Robert Dupont and Stacey
      Maloney-Fust, currently serve as the audit committee until the Company is able
      to recruit independent directors with the appropriate financial experience
      and/or background to serve on such committee and who are truly independent
      from
      internal and external influences, as well as independent under NASDAQ or AMEX
      rules. Although two directors, Messrs. Stephen Bannon and David Otto, are
      non-employee directors, the Board of Directors of the Company did not formally
      appoint by resolution or otherwise an audit committee until March 29, 2004.
      When
      independent directors with the appropriate financial background join the board,
      the board plans to establish a new audit committee, which will then adopt an
      appropriate charter and pre-approval policies and procedures in connection
      with
      services to be rendered by the independent auditors.




-60-


**SIGNATURES**





Pursuant
      to the requirements of the Securities and Exchange Act of 1934, as amended,
      SinoFresh HealthCare, Inc. has duly caused this annual report to be signed
      on
      its behalf by the undersigned thereunto duly authorized.




SINOFRESH
              HEALTHCARE, INC.Date: March
              30, 2006
            By:
            /s/ Charles
              A. FustCharles
              A. FustChairman
              of the Board and Chief Executive Officer (principal executive officer)





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, this
      report has been signed by the following persons on its behalf of SinoFresh
      HealthCare, Inc. and in the capacities indicated.




**Signature**
            **Title**
            **Date**/s/
                Charles A. Fust
            Chairman
                of the Board and Chief Executive Officer
            March
                30, 2006Charles
                A. Fust
            (Principal
                Executive Officer)/s/
                Scott M. Klein
            Chief
                Financial Officer and Secretary
            March
                30, 2006Scott
                M. Klein
            (Principal
                Financial Officer)/s/
                Stacey Maloney-Fust
            Senior
                Vice President; Assistant Secretary; Director
            March
                30, 2006Stacey
                Maloney-Fust/s/
                P. Robert DuPont
            Director
            March
                30, 2006P.
                Robert DuPont







-61-


**Exhibit
      Index**





**Exhibits**







**Number**
            **Description**2.1
            Merger
                Agreement dated September 8, 2003 (1)3.1
            Articles
                of Incorporation (2)3.1.1
            Amendment
                to Articles of Incorporation (3)3.2
            Bylaws
                (2)3.2.1
            Amendment
                to Bylaws(10)4.1
            Form
                of Common Stock Registration Rights Agreement (3)4.2
            Common
                Stock Registration Rights Agreement with D&J Properties
                (3)4.3
            Registration
                Rights Agreement with InvestLinc Equity Fund II, LP,InvestLinc
                Emerging Growth Equity Fund I, LLC and The Invest LineGroup,
                Inc. dated November 15, 2002 (4)4.4
            Form
                of 2003 Warrant Agreement issued to warrant investors for 1,333,970
                warrants, dated September 8, 2003(4)4.5
            Cancelable
                Warrant Agreement with Dave Macrae Trust dated September 1, 2003
                (4)4.6
            2004
                Warrant Agreement with Dave Macrae Trust dated as of September 1,
                2004
                (4)4.7
            Warrant
                Certificate dated November 15, 2002 in favor of The InvestLinc Group
                (4)4.8
            Warrant
                issued to BestBet Media Group, Inc., dated October 1, 2004
                (6)4.9
            Warrant
                issued to Reno Rolle, dated August 19, 2004. (6)4.10
            Warrant
                issued to Ed McMahon, dated October 1, 2004. (6)4.11
            Registration
                Rights Agreement with Reno Rolle, dated August 19, 2004.
                (6)4.12
            Registration
                Rights Agreement with BestBet Media Group, Inc., dated October 1,
                2004.
                (6)4.13
            Form
                of Warrant issued to Debenture investors for a total of 1,663,645
                shares
                of common stock, dated December 6, 2004 (7)4.14
            Registration
                Rights Agreement with Debenture investors, dated December 6, 2004.
                (7)4.15
            Warrant
                issued to Bristol Investment Partners I, dated September 8,
                2003(8)4.16
            Warrant
                issued to Bristol Investment Partners I, dated September 8,
                2003(8)4.17
            Warrant
                issued to Bristol Investment Partners LP I, as of December 6,
                2004(8)4.18
            Warrant
                issued to Michael Gottlieb, dated January 5, 2005(8)4.19
            Warrant
                issued to Michael Gottlieb, dated January 5, 2005(8)4.20
            Form
                of Warrant issued to Medical Advisory Board(8)4.22
            Warrant
                issued to D&J Properties, LLC, dated June 19,
                2003(8)4.23
            Warrant
                issued to D&J Properties, LLC, dated June 19,
                2003(8)4.24
            Warrant
                issued to David N. Macrae, dated as of September 1,
                2003(8)4.25
            Warrant
                issued to Tim Kepler, dated as of November 7, 2003(8)4.26
            Form
                of Debenture issued to Debenture investors, dated December 6, 2004
                (7)4.27
            Warrant
                issued to Adsouth Partners, Inc., dated February 24, 2005
                (11)4.28
            Registration
                Rights Agreement with Adsouth Partners, Inc., dated February 24,
                2005
                (11)4.29
            Non-qualified
                Stock Option Agreement issued to Thomas Fitzgerald, dated May 31
                2005
                (12)4.30
            Non-qualified
                Stock Option Agreement issued to W.
                Randolph Warner, dated November 7, 2005*4.31
            Warrant
                issued to CAM-Global, dated August 26, 2005 (13)4.32
            Non-qualified
                Stock Option Agreement issued to Cynthia Dunn, dated August 30, 2005
                (13)10.1
            Contract
                Manufacturing Agreement between SinoFresh HealthCare, Inc. and AccuMed,
                Inc. (3)10.2
            Agreement
                with Bristol Investment Group, Inc. dated February 7, 2003
                (3)10.3
            Employment
                Agreement with Charles Fust dated December 1, 2002 (3)10.5
            Proprietary
                Development, Right of First Refusal and Acquisition Agreement with
                SinoFresh Research Laboratories, LLC (3)10.8
            National
                In-Store Agreement dated November 21, 2002 (3)10.9
            National
                In-Store Sales and Broker Agreement dated March 27, 2003
                (3)10.10
            Agreement
                with David Farr dated October 9, 2003 (3)10.11
            Accounts
                Receivable Financing Agreement with Alliance Financial Capital, Inc.
                (3)10.12
            Agreement
                with Rubenstein Communications, Inc., dated March 18, 2003 (3)10.13
            Lease
                Agreement with DuPont & Fust Real Estate Ventures, LLC dated April 1,
                2003 (9)10.14
            Allonge
                to Promissory Note dated February 1, 2001, in favor of Invest Linc
                Equity
                Fund II (4)10.15
            Allonge
                to Promissory Note dated February 1, 2001, in favor of Invest LincEmerging
                Growth Equity Fund I, LLC (4)10.16
            Assumption
                Agreement dated November 15, 2002 in favor of Invest Linc EquityFund
                II, Invest Linc Emerging Growth Equity Fund I, LLC (4)10.17
            Consulting
                Agreement with The Invest Linc Group, LLC dated November 15, 2002
                (4)10.18
            Stock
                Purchase Agreement dated November 15, 2002 with Invest Linc Equity
                FundII,
                Invest Linc Emerging Growth Equity Fund I, and The Invest Linc Group
                (4)10.19
            SinoFresh
                HealthCare, Inc. 2002 Stock Option Plan (3)10.19.1
            Form
                of Non-Qualified Stock Option Agreement for 2002 Stock Option
                Plan(10)10.20
            Agreement
                with Moty Herman dated October 21, 2003 (4)10.21
            Agreement
                between Charles Fust and Moty Herman dated October 22, 2003
                (4)10.22
            Supplemental
                Letter Agreement with Moty Herman dated October 28, 2003
                (4)10.23
            Letter
                Agreement from Charles Fust dated April 12, 2003 re Moty Herman Agreements
                (4)10.24
            Teaming
                Agreement with Lovelace Respiratory Research Institute, dated April
                28,
                2004 (5)10.25
            Securities
                Purchase Agreement with Debenture investors, dated December 6, 2004
                (7)10.26
            Form
                of Convertible Debenture issued to investors for total of $1,830,000,
                dated December 6, 2004 (7)10.27
            Security
                Agreement with Debenture investors, and Bushido Capital Partners,
                L.P, as
                agent, dated December 6, 2004 (7)10.28
            Subsidiary
                Security Agreement between SinoFresh Corporation, Debenture investors
                and
                Bushido Capital Partners, L.P., as agent, dated December 6, 2004
                (7)10.29
            Intellectual
                Property Security Agreement with Debenture investors, and Bushido
                Capital
                Partners, L.P., as agent, dated December 6, 2004 (7)10.30
            Subsidiary
                Intellectual Property Security Agreement between SinoFresh Corporation,
                Debenture investors, and Bushido Capital Partners, L.P., as agent,
                dated
                December 6, 2004 (7)10.31
            Guaranty
                Agreement by SinoFresh Corporation in favor of Debenture investors,
                dated
                December 6, 2004 (7)10.32
            Strategic
                Planning Services Agreement with David Macrae, dated September 5,
                2003(8)10.33
            Employment
                Agreement for Scott M. Klein, dated March 28, 2005 as of and effective
                November 1, 2004(10)10.34
            Form
                of Non-Plan Option Agreement (10)10.35
            Settlement
                Agreement and Mutual Releases with various Plaintiffs in federal
                lawsuit
                (14)10.36
            Agreement
                with the Law Firm of David B. Haber, P.A. (14)10.37
            Settlement
                Agreement dated as of December 9, 2005 with Otto Law Group, PLLC
                and David
                Otto (15)10.38
            Consulting
                Agreement with Dane Solomon (16)10.39
            Consulting
                Agreement with David Coloris (16)10.40
            Legal
                Services Agreement dated as of January 20, 2006 with Otto Law Group,
                PLLC
                and David Otto (16)16.1
            Letter
                from Salberg & Co. dated March 30, 2004 (10)21.1
            Subsidiaries
                of the Registrant (10)23.3
            Consent
                of Accountants31.1
            Certification
                of Chief Executive Officer pursuant to
                Section 302 of the Sarbanes-Oxley Act of 2002*31.2
            Certification
                of Chief Financial Officer pursuant to
                Section 302 of the Sarbanes-Oxley Act of 2002*32.1
            Certification
                of Chief Executive Officer pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002*32.2
            Certification
                of Chief Financial Officer pursuant to
                Section 906 of the Sarbanes-Oxley Act of
                2002*




*
      Filed
      herewith.




(1)
      Incorporated by reference to Registrant's Form
      8-K, filed on September 23, 2003.




(2)
      Incorporated by reference to Registrant's Form
      10-SB12G, filed on April 29, 2002, File No. 0-49764.




(3)
      Incorporated by reference to Registrant's Form
      10-QSB for the fiscal quarter ended September 30, 2003, filed on November 17,
      2003, File No. 0-49764.




(4)
      Incorporated by reference to Registrant's Form
      10-KSB for the fiscal year ended December 31, 2003, filed on April 14, 2004,
      File No. 0-49764.




(5)
      Incorporated by reference to the Registrant's Form
      10-QSB for the fiscal quarter ended March 31, 2004, filed on May 17, 2004,
      File
      No. 0-49764.




(6)
      Incorporated by reference to Registrant's Form
      8-K dated October 18, 2004, filed on October 22, 2004, File No. 0-49764.




(7)
      Incorporated by reference to Registrant's Form
      8-K dated December 6, 2004, filed on December 10, 2004, File No.
      0-49764.




(8)
      Incorporated by reference to Registrant's Form
      SB-2 Registration Statement filed on January 6, 2005, File No.
      333-121880.




(9)
      Incorporated by reference to Registrant's Amendment
      No. 1 to Form SB-2 Registration Statement filed on January 27, 2005, File No.
      333-121880.




(10)
      Incorporated by reference to Registrant's Form
      10-KSB for the fiscal year ended December 31, 2004, filed on March 31, 2005,
      File No. 0-49764.





(11)
      Incorporated by reference to the Registrant's Form
      10-QSB for the fiscal quarter ended March 31, 2005, filed on May 16, 2005,
      File
      No. 0-49764.




(12)
      Incorporated by reference to the Registrant's Form
      10-QSB for the fiscal quarter ended June 30, 2005, filed on August 15, 2005,
      File No. 0-49764.





(13)
      Incorporated by reference to the Registrant's Form
      10-QSB for the fiscal quarter ended September 30, 2005, filed on November 14,
      2005, File No. 0-49764.





(14)
      Incorporated by reference to Registrant's Form
      8-K, filed on December 14, 2005, File No. 0-49764.




(15)
      Incorporated by reference to Registrant's Form
      8-K, filed on December 20, 2005, File No. 0-49764.




(16)
      Incorporated by reference to Registrant's Form
      S-8 Registration Statement filed on February 7, 2006, File No.
      333-131646.





-62-