As disclosed by Company’s FORM 10-KSB for the fiscal year ended December 31, 2005, 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. 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.
According to a press release date December 15, 2005, SinoFresh HealthCare, Inc. announced today that on December 8, 2005 it concluded a settlement of a federal lawsuit that has been ongoing since February 2004. The lawsuit, as amended, was filed by two independent directors and several other shareholders as a derivative action against the company and several of its officers and included claims of malpractice against the company's former general counsel, Greenberg Traurig. The claims against the Company and its officers were dismissed in August, 2005. The claims against Greenberg Traurig were not dismissed and were the focus of a mediation hearing on December 7, 2005. The settlement arising out of the mediation resulted in (i) the resolution of all matters between the two outside directors and the Company, with the two outside directors remaining on the board of directors, (ii) the discharge of all outstanding legal fees owed to Greenberg Traurig and (iii) an undisclosed cash payment by Greenberg Traurig to SinoFresh. All parties agreed to mutually release each other from further liability.
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 original complaint charges SinoFresh Healthcare, Inc. and several of it key officers and directors with violation of numerous Federal Securities laws. Specifically, the action alleges Defendants actively concealed same and directed accounting manipulations and improprieties that were intended to mask severe problems. The Defendants made materially false misleading statements and issued inappropriate options to themselves and others without disclosing the material adverse facts about SFHC. Thus, the financial statements, which failed to conform to GAAP, and other material provided to the public, to the shareholder and to the SEC did not properly reflect the company’s true financial condition.