SHINECO, INC. - Annual Report 2007

10KSB/A 1 form10ksba.htm SHINECO FORM 10-KSB/A2 Shineco Form 10-KSB/A2 Licensed to: Financial Media Group Document Created using EDGARIZER HTML 3.0.3.0 Copyright 2005 EDGARfilings, Ltd., an IEC company. All rights reserved EDGARfilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB/A-2

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

For the fiscal year ended December 31, 2004

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

For the transition period from ______________ to __________________

SHINECO, INC.

(Name of small business in its charter)

Delaware	000-50913	52-2175898
(State
or other Jurisdiction of Employer)	(Commission
Identification #)	(IRS
file number)

B-3106, #39 East 3rd Ring Road, Chaoyang District

(Address of Principal Executive Office street and number)

Beijing, PR China 100022

(City, State and ZIP Code)

Issuer's telephone number: (86) 10-5869-3011

Securities registered under Section 12(b) of the Act: None

Title of each class None

Securities registered under Section 12(g) of the Act:

Common Stock $.001 par value

(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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. x

Issuer's revenue for its most recent fiscal year: $2,102,219

State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked priced of such stock, as of a specified date within the past 60 days (See definition of affiliate in Rule 12b-2): $-0-

The number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 9,298,823 as of June 30, 2005.

them and identify the part of the Form 10-KSB (e.g. Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed documents should be clearly described for identification purposes.

Forward-Looking Statements

Certain statements contained herein constitute "forward-looking statements" within the meaning of Section 27 A of the Securities Exchange Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "plans," "may," "intends," "will," or similar terms. These statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) the Company's business and growth strategies and the Company's financing plans.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ from those projected in the forward-looking statements.

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

General

Shineco, Inc. (“the Company,” or “we”) was incorporated under Delaware state law on August 20, 1997. On December 30, 2004, the Company acquired all of the issued and outstanding shares of Beijing Tenet-Jove Technological Development Corp., Ltd. (“Tenet-Jove”), a People’s Republic of China company, in exchange for restricted shares of the Company’s common stock, and the sole operating business of the Company became that of its subsidiary, Tenet-Jove. On June 9, 2005, the Company changed its name to Shineco, Inc.

Tenet-Jove currently develops, manufactures and distributes Apocynum products in the growing economy of China through its national marketing network. Apocynum products are specialized fabric and food products designed to incorporate traditional Eastern medicines with modern scientific and developed health products predicated on centuries-old traditions of Eastern herbal remedies derived from the Apocynum venetum raw material. These remedies have been carefully documented in Li Shizhen’s famous “Compendium of Materia Medica” (Chinese: Bencao Gangmu), which dates back to 1578 A.D., during the Ming Dynasty.

Tenet-Jove was established in the People’s Republic of China in 2003 and is headquartered in Beijing. In today’s maturing and aging society, people are looking for new ways to improve fitness levels so that they can continue to live a comfortable and healthy life. Tenet-Jove aims to establish and offer a new value called “health-building,” moving forward from the conventional concept of health maintenance. Drawing on Tenet-Jove's core competence in bio-information sensing and health management technology, we offer innovative solutions and products to support the prevention and treatment of lifestyle-induced diseases.

Operating in the China’s growing healthcare marketplace, we have established a number of initiatives and strategies that combine customer sensitivity with product development. Our mission is, through our advanced and high-quality healthcare products, to provide our customers with suggestions and solutions for health improvement.

Business of the Company

THE PRODUCT

The Company refers to its technology as "Far Infrared," or FIR, meaning that its products have a higher than normal tendency to absorb light from the far infrared end of the spectrum. The function of our products is analogous to a nicotine patch in that the textiles manufactured with the Company's Apocynum fabrics are impregnated with the product which is then absorbed through the wearer's skin.

All of our products are developed and manufactured in our research, development and manufacturing base in Tianjin and distributed through four offices and many independent distributors across China. This extensive distribution network and sustainable R&D system enables us to provide healthcare products to our customers throughout the PRC.

The Company presently has approximately 30 Apocynum products, ranging from articles of clothing to household products such as pillows, which are classified into 3 series as described as follows:

· Apocynum fiber textiles products:

· sleep recovery/maintenance products;

· health care underwear products;

· protective apparatus products (such as wrist and ankle wraps);

· health care bedding products.

· Apocynum food products

· scented tea;

· Apocynum honey;

· Apocynum flower honey;

· Apocynum bee gum

· Home-use clinical equipment products

· Home-use clinical equipment products are in the introductory stage.

MANUFACTURING

The Company maintains and operates a factory for the production of its product, and also subcontracts the manufacture of some of the fabric.

To assure the reliability of resources and reduce the cost of raw materials, the Company plans to establish an Apocynum raw material production base in Ku’erle of Xinjiang Province for providing raw materials and semi-finished products to the Company.

THE PATENTS

Presently the Company has obtained national patents for

· Apocynum fiber blending method

· Far-infrared ceramic material

· Apocynum far-infrared multifunctional surface material

· 40* fine Apocynum cloth

SALES AND MARKETING

The Company conducts sales through vendors, regional sales offices either as directly owned subsidiaries or as branch offices of the Company. To date, the Company conducts sales through four subsidiary and branch offices.

COMPETITION

At present, the Company has just one competitor, the “Hao Yi” Company of Tianjin, which is a small company that produces Apocynum fiber textile products. The competitor has total assets of approximately RMB5 million (US$ equivalent $646,496), and imitates the Company’s products that are sold at basically similar prices. The Company believes that its products are superior in respect of technical content, quality, and appearance and packaging and that at present, there is no serious competitor in the Apocynum fiber textile industry that can threaten the Company. However, once a substantial healthcare product company gets involved in this industry, the Company will face serious competition.

Administrative Offices

We currently occupy 4 offices. The balance of our office space is leased by us under lease arrangements we deem to be satisfactory. We lease our headquarters, located at Suite 3106, Building B, Ring Middle Road, Chaoyang District, Beijing, China, for approximately $60,000 a year, pursuant to an operating lease that expires in June 2009.

Employees

The Company currently has 30 full-time employees and plans to hire additional employees as required. No remuneration will be paid to the Company's officers except as set forth under "Executive Compensation" and under "Certain Relationships and Related Transactions."

ITEM 2. DESCRIPTION OF PROPERTY

We currently have no investments in real estate, real estate mortgages, or real estate securities, and do not anticipate making any such investments in the future. However, the policy of the Company with respect to investment in real estate assets could be changed in the future without a vote of security holders.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.

No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0 percent of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

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

No matters were submitted to a vote of the security holders of the Company during the quarter ended December 31, 2004.

Part II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There has been no established public trading market for the Company's securities since its inception on August 20, 1997, and there can be no assurance that such market will develop. As of June 30, 2005, there were 9,298,823 shares outstanding, and the Company had 39 shareholders of record. No dividends have been paid to date and the Company's Board of Directors does not anticipate paying dividends in the foreseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion relates to the results of our operations to date, and our financial condition: This report contains forward looking statements relating to our Company's future economic performance, plans and objectives of management for future operations, projections of revenue mix and other financial items that are based on the beliefs of, as well as assumptions made by and information currently known to, our management. The words "expects, intends, believes, anticipates, may, could, should" and similar expressions and variations thereof are intended to identify forward-looking statements. The cautionary statements set forth in this section are intended to emphasize that actual results may differ materially from those contained in any forward looking statement.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other Financial information contained elsewhere in this Form 10-KSB.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure or contingent liabilities. We base these estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results will differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted.

We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve more significant judgments and estimates used in the preparation of our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. We have discussed the development, selection and application of our critical accounting policies with the audit committee of our board of directors, and our audit committee has reviewed our disclosure relating to our critical accounting policies in this "Management's Discussion and Analysis or Plan of Operations."

Revenue Recognition

The Company follows the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin 104 for revenue recognition. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

Foreign Currency Translation

Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," and are included in determining net income or loss.

For foreign operations with the local currency as the functional currency, assets and liabilities are translated from the local currencies into U.S. dollars at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the financial statements. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive loss.

The functional currency of the Company's subsidiaries is the local currency, Chinese Reminbi (RMB). The financial statements of the subsidiary are translated to United States dollars using year-end rates of exchange for assets and liabilities (8.28 RMB to one U.S. Dollar), and average rates of exchange for the period for revenues, costs, and expenses (8.28 RMB to one U.S. Dollar). Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and were not material during the periods presented. The cumulative translation adjustment and effect of exchange rate changes on cash at December 31, 2004 was not material.

Results of Operations

We are a healthcare product manufacturer and health solution provider in the PRC. We principally develop, manufacture, and distribute healthcare products through our national sales and services network to our customers in the PRC.

Our healthcare business is comprised of research, development and application of “health-building” technology.

Since the establishment of Tenet Jove in 2003, we have gradually developed a series of products and established a nation-wide marketing and distribution network.

The Company’s revenues for the years ended December 31, 2004 and 2003 were $2,102,219 and $ -0- respectively. The Company's selling, general and administrative expenses for the year ended December 31, 2004, were $832,332 and for the year ended December 31, 2003, were $ -0-.

Our operating results are presented on a consolidated basis for the year ended December 31, 2004, as compared to the year ended December 31, 2003.

| Item | 2004 — Amount | Percentage of revenue | 2003 — Amount | | --- | --- | --- | --- | | | US$ | (%) | US$ | | Revenues | 2,102,219 | | 0 | | Costs & expenses | 829,099 | 39.44 | 0 | | Gross Profit | 1,273,120 | 60.56 | 0 | | Advertising | 3,490 | 0.17 | 0 | | Bad debt expense | 165,766 | 7.89 | 0 | | Other selling expense | 88,252 | 4.20 | 0 | | Salaries and benefits | 284,664 | 13.54 | 0 | | D&A | 27,104 | 1.29 | 0 | | General &administrative | 263,046 | 12.51 | 0 | | Interest expenses | 29,013 | 1.38 | 0 | | Other Income | 408 | 0.02 | 0 | | Gain on disposal of subsidiaries | 80,945 | 3.85 | 0 | | Income before tax minority interest | 493,613 | 23.48 | 15,026 | | Income tax | 1,617 | 0.08 | 0 | | Minority interest | 1,840 | 0.09 | 0 | | Net income | 490,156 | 23.32 | 15,026 |

Revenue

Our revenue for the year ended December 31, 2004 was $2,102,219, which cannot be usefully compared to 2003 because all 2003 operations were disposed of by sale. We derive our revenues primarily from sales of our products. Our operating revenues are composed of sales of healthcare products. Our revenues were significantly influenced by overall market demand for Chinese herbal remedies and our marketing and sales efforts. The significant revenue we generated in 2004 was due to the fact that our healthcare business was experiencing rapid market expansion.

We believe that revenues will increase in the next several years as a result of planned expansion of production and anticipated increased sales.

Gross profit margin

Our gross margin on sales was 60.56% in 2004, which cannot be usefully compared to 2003 because all 2003 operations were disposed of by sale. Our gross margin percentage was influenced in significant part because we lowered the cost of goods sold by subcontracting certain steps in production and improving our manufacturing techniques for controlling production costs.

Net income

Our consolidated net income was $490,156 for the year ended December 31, 2004 as compared to $15,026 for the prior year period. This increase is attributable to the revenue we generated from our continuing operations in fiscal 2004, as compared to fiscal 2003, which had no net income from continuing operations. We also made an entry for a non-recurring gain resulting from the disposal of our subsidiaries by sale.

Liquidity and Sources of Capital

We generally finance our operations from cash flow generated internally and customer deposits. As of December 31, 2004, the Company had current assets of $4,094,219, current liabilities of $2,772,344 and working capital of $1,321,875 and shareholders’ equity of $1,597,070.

Our operations used net cash of $493,859 for the year ended December 31, 2004. At December 31, 2004, cash and cash equivalents were $64,272. Working capital was $1,321,875 at December 31, 2004, reflecting a current ratio of 1.48:1 compared to 1.12:1 for 2003. Our current ratio for fiscal year 2004 was slightly improved compared to that of the previous year.

We anticipate that our working capital resources are adequate to fund anticipated costs and expenses for the year ending December 31, 2005.

As of December 31, 2004, our cash and bank balances were mainly denominated in Renminbi (“RMB”) and United States dollars (“US$”) while our bank borrowings were mainly denominated in RMB. Our revenue and expenses, assets and liabilities are mainly denominated in RMB and US$. Since the exchange fluctuations amongst these currencies are low, we believe there is no significant exchange risk.

Management believes the Company's working capital is currently sufficient for the Company to implement its business plan and that its income from current operations will be sufficient for its liquidity needs.

Recent accounting pronouncements

In May 2004, the Emerging Issues Task Force of the FASB came to a consensus regarding EITF 02-14 “Whether an Investor Should Apply the Equity Method of Accounting to Investments Other Than Common Stock”. The consensus of the task force is that the equity method of accounting is to be used for investments in common stock or in-substance common stock, effective for reporting periods beginning after September 15, 2004. The Company currently has no equity investments other than its consolidated subsidiaries. As such, this standard has no application to the Company.

In November 2004, the FASB issued Statement No. 151, “Inventory Costs”. SFAS No. 151 requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current period charges and 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 fiscal periods beginning after June 15, 2005. The Company believes that the application of SFAS No. 151 will have no significant impact on the financial statements.

In December 2004, the FASB issued Statement No. 153, “Exchange of Non-Monetary Assets”. SFAS No. 153 confirms that exchanges of nonmonetary assets are to be measured based on the fair value of the assets exchanged, except for exchanges of nonmonetary assets that do not have commercial substance. Those transactions are to be measured at entity specific values. The Company believes that the application of SFAS No. 153 will have no significant impact on the financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment," which amends SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123, as revised, requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost will be recognized over the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The effective date for the Company is the first reporting period beginning after December 15, 2005. Management expects that the application of SFAS No. 123 (revised 2004) will have no effect on the Company, as it has not historically compensated its employees with stock based compensation .

ITEM 7. FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Audit Committee

Shineco, Inc.

Beijing, People’s Republic of China

We have audited the consolidated balance sheets of Shineco, Inc. (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Shineco, Inc. as of December 31, 2004 and 2003, and the results of its consolidated operations and its consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Since our previous report dated April 4, 2005 except notes 15 and 16, which were dated October 31, 2006, as described in note 16, the Company discovered a material error in its classification of the purchase of an intangible asset and its calculations of earnings per share. However, the Company has restated the financial statement to reflect the correction of these errors.

Child, Van Wagoner & Bradshaw, PLLC

Salt Lake City, Utah

April 4, 2005, except Note 16, which is dated March 23, 2007

SHINECO, INC.

CONSOLIDATED BALANCE SHEETS

| | December 31, — 2004 | 2003 | | --- | --- | --- | | | Restated | | | ASSETS | | | | Current assets | | | | Cash and cash equivalents | $ 64,272 | $ 4,454 | | Trade receivables, net | 1,213,934 | 46,698 | | Other receivables | 324,426 | 6,005 | | Vendor deposits | 129,606 | -- | | Prepaid expenses | 56,471 | -- | | Inventories | 2,305,510 | 629,521 | | Total current assets | $ 4,094,219 | 686,678 | | Property, plant and equipment, net | 105,248 | 5,577 | | Related party receivables | 79,046 | -- | | Intangibles, net | 182,472 | -- | | Total assets | $ 4,460,985 | $ 692,255 | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | Current liabilities | | | | Trade payables | $ 1,144,012 | $ 134,482 | | Related party payables | 588,201 | 255,862 | | Accrued liabilities | 11,627 | 159,858 | | Other payables | 195,567 | -- | | Notes payable | 314,009 | -- | | Taxes payable | 87,535 | -- | | Customer deposits | 409,945 | -- | | Accrued employee benefits | 21,448 | -- | | Loans from employees | -- | 63,960 | | Total current liabilities | 2,772,344 | 614,162 | | Minority interest | 91,571 | -- | | Commitments and contingencies | | | | Stockholders’ equity | | | | Preferred stock; par value $.001, 5,000,000 shares authorized; none issued and outstanding | -- | -- | | Common stock; par value $.001, 25,000,000 shares authorized; 9,298,823 and 1,373,823 issued and outstanding | 9,299 | 1,374 | | Additional paid in capital | 1,079,908 | 59,012 | | Retained earnings | 507,863 | 17,707 | | Accumulated other comprehensive income | -- | -- | | Total stockholders’ equity | 1,597,070 | 78,093 | | Total liabilities and stockholders’ equity | $ 4,460,985 | $ 692,255 |

See Notes to Consolidated Financial Statements.

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SHINECO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

| | Year ended December 31, — 2004 | 2003 | | | --- | --- | --- | --- | | | (Restated) | (Restated) | | | Revenues | | | | | Sales revenues | $ 2,102,219 | $ | -- | | Cost of goods sold | 829,099 | | -- | | Gross profit | 1,273,120 | | -- | | Operating expenses | | | | | Advertising | 3,490 | | -- | | Bad debt expense | 165,766 | | -- | | Other selling expenses | 88,252 | | -- | | Salaries and benefits | 284,664 | | -- | | Depreciation and amortization | 27,104 | | -- | | Other general and administrative expenses | 263,046 | | -- | | Total operating expenses | 832,322 | | -- | | Net operating income | 440,798 | | -- | | Other income (expense) | | | | | Interest expense | (29,013 | ) | -- | | Gain on disposal of subsidiaries | 408 | | -- | | Total other income (expense) | (28,605 | ) | -- | | Income before taxes and minority interest | 412,193 | | -- | | Provision for income taxes | 1,617 | | -- | | Income before minority interest | 410,576 | | -- | | Minority interest in income of subsidiaries | (1,840 | ) | -- | | Income from continuing operations | 408,736 | | -- | | Income from operations of disposed subsidiaries | 475 | | 15,026 | | Gain on disposal of subsidiaries | 80,945 | | -- | | Net income from discontinued operations | 81,420 | | 15,026 | | Net income | $ 490,156 | $ | 15,026 | | Foreign currency translation adjustment | -- | | -- | | Comprehensive income | $ 490,156 | $ | 15,026 | | Basic earnings per common share: | | | | | From continuing operations | $ 0.04 | $ | -- | | From discontinued operations | $ 0.01 | $ | -- | | From net income | $ 0.05 | $ | -- | | Diluted earnings per common share: | | | | | From continuing operations | $ 0.04 | $ | -- | | From discontinued operations | $ 0.01 | $ | -- | | From net income | $ 0.05 | $ | -- | | Denominator for basic earnings per share | 9,298,823 | | 9,298,823 | | Denominator for diluted earnings per share | 9,300,160 | | 9,298,823 |

See Notes to Consolidated Financial Statements.

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SHINECO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Restated)

| Shares | | Amount | Additional — Paid In Capital | Earnings | | (Loss) | | Total | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Balance, December 31, 2002 | 1,373,823 | $ 1,374 | $ 59,012 | $ | 2,681 | $ | -- | $ 63,067 | | | -- | | | | | | | | | | | Net income for the year | -- | -- | -- | | 15,026 | | -- | 15,026 | | | Balance December 31, 2003 | 1,373,823 | 1,374 | 59,012 | | 17,707 | | -- | 78,093 | | | Business combination with Tianjin Apr 27 | | | 1,026,571 | | -- | | -- | 1,026,571 | | | Stock issued for services prior to recapitalization Oct 29 | 1,125,000 | 1,125 | 1,125 | | -- | | -- | 2,250 | | | Shares issued in merger Dec 30 | 6,800,000 | 6,800 | (6,800 | ) | -- | | -- | -- | | | Net income for the year | -- | -- | | | 491,996 | | -- | 491,996 | | | Net income - minority interest | -- | -- | -- | | (1,840 | ) | -- | (1,840 | ) | | Balance December 31, 2004 | 9,298,823 | $ 9,299 | $ 1,079,908 | $ | 507,863 | $ | -- | $ 1,597,070 | |

See Notes to Consolidated Financial Statements.

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SHINECO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

| | Year ended December 31, — 2004 | 2004 | | | | --- | --- | --- | --- | --- | | | (Restated) | | | | | Cash flows from operating activities: | | | | | | Net income | $ 495,246 | $ | 15,026 | | | Adjustments to reconcile net loss to net cash provided by (used in) operations: | | | | | | Depreciation and amortization | 27,137 | | 2,276 | | | Provision for allowance on receivables | 165,766 | | -- | | | Inventory reserves | 111,092 | | -- | | | Stock issued for services | 2,250 | | -- | | | Minority interest | 1,840 | | -- | | | Gain on disposal of subsidiary | (80,945 | ) | -- | | | Changes in operating assets and liabilities: | | | | | | Trade receivables | (1,333,002 | ) | 17,524 | | | Other receivables | (380,590 | ) | (2,776 | ) | | Vendor deposits | (129,606 | ) | -- | | | Prepaid expenses | (56,471 | ) | 40,366 | | | Inventories | (782,177 | ) | (3,397 | ) | | Trade payables | 904,428 | | 1,586 | | | Accrued liabilities | (148,231 | ) | 69,873 | | | Other payables | 195,567 | | -- | | | Taxes payable | 87,535 | | -- | | | Customer deposits | 409,944 | | -- | | | Accrued employee benefits | 21,448 | | -- | | | Net cash provided by (used in) operations | (493,859 | ) | 140,478 | | | Cash flows from investing activities: | | | | | | Related party receivables | (79,046 | ) | -- | | | Proceeds from sale of subsidiary | 172,283 | | -- | | | Purchase of property and equipment | (121,948 | ) | -- | | | Net cash used in investing activities | (28,711 | ) | -- | | | Cash flows from financing activities: | | | | | | Related party payables | 332,339 | | (134,708 | ) | | Repayments on short-term notes payable | (63,960 | ) | (7,864 | ) | | Proceeds from short term loans | 314,009 | | -- | | | Net cash provided by (used in) financing activities | 582,388 | | (142,572 | ) | | Effect of rate changes on cash | -- | | -- | | | Increase (decrease) in cash and cash equivalents | 59,818 | | (2,094 | ) | | Cash and cash equivalents, beginning of period | 4,454 | | 6,548 | | | Cash and cash equivalents, end of period | $ 64,272 | $ | 4,454 | | | Supplemental disclosures of cash flow information: | | | | | | Cash paid for interest | $ 20,458 | | -- | | | Cash paid for income taxes | $ -- | | -- | | | Supplemental disclosures of non-cash investing and financing activities: | | | | | | Stock issued for services | $ 2,250 | | -- | | | Inventory and intangibles acquired as additional paid in capital | $ 1,026,571 | | -- | |

See notes to consolidated financial statements.

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SHINECO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

Shineco, Inc. (the Company) was incorporated on August 20, 1997 in the State of Delaware as Supcor, Inc. On December 30, 2004 the Company acquired all of the outstanding stock of Beijing Tenet Jove Technological Development Co., Ltd. in exchange for stock of the Company. The consolidated results of operations are primarily those of Beijing Tenet Jove and its consolidated subsidiaries.

Beijing Tenet Jove Technological Development Co., Ltd. (Beijing Tenet Jove) was incorporated on December 16, 2003 under the laws of the People’s Republic of China (the PRC). In the PRC, Ltd, or Limited, is equivalent to Inc, or Incorporated, in the United States (US). However, the operations of the largest subsidiary, Tian Bai, established on September 22, 2000, are included in these financial statements prior to the formation of Beijing Tenet Jove, as the acquisition of Tian Bai was accounted for as a transfer of equity interests between entities under common control.

The Company primarily manufactures and sells clothing and related products, using natural, health conducive materials.

2. BASIS OF PRESENTATION

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) and have been retroactively restated to give effect to the recapitalization due to a reverse merger consummated on December 30, 2004. This basis differs from that used in the statutory accounts of the Company, which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in the PRC. All necessary intercompany transactions and balances have been eliminated in consolidation, and all necessary adjustments have been made to present the consolidated financial statements in accordance with US GAAP.

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries subsequent to the date of incorporation of the Company. The results of operations (through the date of sale) of subsidiaries that have been sold are included in income (loss) from discontinued operations. The Company’s subsidiaries during the years ended December 31, 2004 and 2003 are as follows:

| Subsidiary name | Date acquired | Date sold | Ownership % | | --- | --- | --- | --- | | Tian Yi Hua Tai, Tianjin | April 27, 2004 | n/a | 90% | | Tian Bai | December 16, 2003 | October 18, 2004 | 51% | | Haer Bin | January 12, 2004 | July 27, 2004 | 51% | | QiQiHaer | January 14, 2004 | November 12, 2005 | 55% | | Nan Jing | February 13, 2004 | November 10, 2005 | 51% |

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ECONOMIC AND POLITICAL RISKS

The Company faces a number of risks and challenges as a result of having primary operations and markets in the PRC. Changing political climates in the PRC could have a significant effect on the Company’s business.

ESTIMATES

The preparation of consolidated 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 disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, cash and cash equivalents includes cash on hand and demand deposits held by banks. None of the Company’s deposits are insured by the Federal Deposit Insurance Corporation or any other entity of the U.S. government.

TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful accounts is made when collection of the full amount becomes questionable. The allowance for doubtful accounts was $165,766 and $52,600 at December 31, 2004 and 2003, respectively.

INVENTORIES

Inventories consist of raw materials, packaging materials, sub-contracting materials, production costs, and finished products. The inventories are valued at the lower of cost (first-in, first-out method) or market. Impairment and changes in market value are evaluated on a per item basis.

If the cost of the inventory exceeds the market value evaluation based on total inventory, provisions are made for the difference between the cost and the market value. Provision for potential obsolete or slow moving inventory is made based on analysis of inventory levels, age of inventory and future sales forecasts. Inventories consisted of the following:

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| Raw materials | December 31, 2004 — $ 456,914 | $ | -- | | | --- | --- | --- | --- | --- | | Packaging materials | 105,829 | | -- | | | Sub-contracting materials | 293,658 | | | | | Production costs | 10,641 | | -- | | | Finished products | 1,549,560 | | 698,007 | | | Obsolescence reserve | (111,092 | ) | (68,486 | ) | | Totals | $2,305,510 | | $629,521 | |

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the useful lives of the assets. Amortization of leasehold improvements is calculated on a straight-line basis over the life of the asset or the term of the lease, whichever is shorter. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to property and equipment used in production is reported in cost of sales. Property and equipment are depreciated over their estimated useful lives as follows:

| Machinery and equipment | 10 years | | --- | --- | | Vehicles | 7 years | | Office equipment | 7 years |

Long-term assets of the Company are reviewed annually to assess whether the carrying value has become impaired, according to the guidelines established in Statement of Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company also evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. No impairment of assets was recorded in the periods reported.

REVENUE RECOGNITION

Revenues are recognized as earned when the following four criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the seller's price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.

ADVERTISING EXPENSE

Advertising costs are expensed as incurred. Advertising expense amounted to $3,490, and $0 for the years ended December 31, 2004 and 2003, respectively.

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FOREIGN CURRENCY AND COMPREHENSIVE INCOME

The accompanying consolidated financial statements are presented in United States (US) dollars. The functional currency is the Renminbi (RMB). The consolidated financial statements are translated into US dollars from RMB at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

The exchange rate for RMB to US dollars has varied by only 100ths during 2004 and 2003. Thus, the consistent exchange rate used has been 8.28 RMB per each US dollar. Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.

RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guarantee the RMB amounts could have been, or could be, converted into US dollars at rates used in translation.

TAXES

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

Currently, the Company has recorded no income taxes and no deferred taxes because it is a high-tech company registered in Chinese Zhongguancun Science Park. In China, high-tech companies are encouraged to promote their technologies to the market, so the Company is exempted from income tax for its first three years.

EARNINGS PER SHARE

Basic earnings per common share ("EPS") is calculated by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per common share are calculated by adjusting the weighted average outstanding shares, assuming conversion of all potentially dilutive securities, such as stock options and warrants. The numerator and denominator used in the basic and diluted EPS of common stock computations are presented in the following table:

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| | Year ended December 31, — 2004 | 2003 | | --- | --- | --- | | NUMERATOR FOR BASIC AND DILUTED EPS | | | | Income from continuing operations available to common shareholders | 408,736 | -- | | Income from discontinued operations | 81,420 | 15,026 | | Net income to common stockholders | $ 490,156 | $ 15,026 | | DENOMINATOR FOR BASIC EPS | | | | Weighted average shares of common stock outstanding | 9,298,823 | 9,298,823 | | EPS - Basic from continuing operations | $ 0.04 | $ -- | | EPS - Basic from discontinued operations | $ 0.01 | $ -- | | EPS - Basic | $ 0.05 | $ -- | | DENOMINATOR FOR FULLY DILUTED EPS | | | | Weighted average shares of common stock outstanding | 9,298,823 | 9,298,823 | | Exercisable warrants | 1,337 | -- | | Weighted average common shares and warrants outstanding | 9,300,160 | 9,298,823 | | EPS - Fully diluted from continuing operations | $ 0.04 | $ -- | | EPS - Fully diluted from discontinued operations | $ 0.01 | $ 0.00 | | EPS - Fully diluted | $ 0.05 | $ 0.00 |

BUSINESS COMBINATIONS

On September 22, 2000, Tian Bai was incorporated in the PRC to manufacture and sell clothing and related products. On December 16, 2003 Beijing Tenet Jove was incorporated in the PRC and purchased a 51% interest in Tian Bai. The previous owners of the 51% interest in Tian Bai (from September 2000 to December 2003) are the same as the owners of Beijing Tenet Jove, which fact makes the transaction fall outside of the requirements for normal purchase accounting (SFAS 141). Instead, it constituted a transfer between entities under common control. A transfer of entities under common control is accounted for in a manner similar to a pooling of interests, wherein the accounts of the subsidiary are included in the consolidated results as if the transfer had occurred at the beginning of the first period presented (SFAS 141 Appendix D 11-18; see also EITF 02-5).

On January 12, 2004, Haer Bin was incorporated in the PRC, as a 51% owned subsidiary of Beijing Tenet Jove. At the inception of Haer Bin, Beijing Tenet Jove contributed 51% of the registered capital of Haer Bin and recorded it as an investment in subsidiary, which account was eliminated on consolidation.

On January 14, 2004, QiQiHaer was established in the PRC as a 55% owned subsidiary of Beijing Tenet Jove. At the inception of QiQiHaer, Beijing Tenet Jove contributed 275,000 RMB ($33,213) as 55% of the registered capital of QiQiHaer and recorded it as an investment in subsidiary, which account was eliminated on consolidation.

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On February 13, 2004 Nan Jing was established in the PRC as a 51% owned subsidiary of Beijing Tenet Jove. At the inception of Nan Jing, Beijing Tenet Jove contributed 408,000 RMB($49,275) as 51% of the registered capital of Nan Jing and recorded it as an investment in subsidiary, which account was eliminated on consolidation.

Tian Yi Hua Tai, Tianjin (Tianjin) was incorporated in the PRC on August 12, 2003 as a manufacturer of clothing and related products. On April 27, 2004 Tianjin merged into Beijing Tenet Jove, becoming a 90% subsidiary. The Company paid cash of $36,232 and notes payable of $100,823 for an aggregate of $137,055 to the owners in exchange for the 90% interest. As the principal owners of Tianjin were the same as the principal owners of Beijing Tenet Jove, the transaction was accounted for as a transfer of entities under common control whereby the assets and liabilities of the acquired company were recorded at their historical cost basis and the results of its operations are consolidated with those of the Company as if the transfer had occurred at the beginning of the first period presented. No adjustment to additional paid-in capital was required, as the amount paid was equal to the historical cost basis of the net assets acquired. The following table details the net assets acquired in the transaction.

Cash	$
Accounts
receivable	5,398
Inventory	467,065
Other
receivables	123,672
Vendor
deposits	205,263
Fixed
assets	43,197
Payables	(707,821	)
Accrued
liabilities	(12,050	)
Net
assets of subsidiary	152,283
Minority
interest @ 10%	(15,228	)
Net
assets acquired	$ 137,055

In order to reduce its overhead chargeable to its subsidiaries, The Company decided to change its structure from a parent-subsidiary model to a supplier-dealer model. On July 27, 2004, Beijing Tenet Jove sold for cash all of its equity interest in Haer Bin. After disposal we had no continuing involvement with Haer Bin.

During the process of its operation and development, the company found a more competent manufacturer with higher content of hi-tech - Tianjin Tian Yi Hua Tai, Tianjin Tenet Health is an owner of 13 patents in Apocynum technology, and it is more able to meet the demand of the Company in applying bio hi-tech to the Apocynum industry. Consequently, the Company discontinued its operation in Tian Bai. On October 18, 2004, Beijing Tenet Jove sold all of its equity interest in Tian Bai for cash. Since disposal, Beijing Tenet Jove has had no transaction with Tian Bai and thus has no continuing involvement with Tian Bai.

In aggregate, the Company recognized gains of $80,945 on the sales of these subsidiaries, which is included as gain on disposal of subsidiaries in the statement of operations. The following table details the net assets sold in these transactions:

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Cash	$
Accounts receivable	65,345
Inventory	412,816
Other receivables	286,095
Fixed assets	20,132
Account payables	(151,769	)
Accrued liabilities	(480,142	)
Net
assets of subsidiaries	179,094
Minority interest @ 49%	(87,756	)
Net
assets sold	$ 91,338
Sale
proceeds	$ 172,283
Gain
on disposal of subsidiaries	$ 80,945

On November 4, 2004, owners of Beijing Tenet Jove acquired a controlling interest in the Company from its previous stockholders. On December 30, 2004, the Company issued 6,800,000 s hares of its common stock in exchange for 100% of the outstanding registered capital of Beijing Tenet Jove. Beijing Tenet Jove is treated as the accounting acquirer in a reverse merger. Consequently, these financial statements reflect the accounts and operations of Beijing Tenet Jove and its consolidated subsidiaries, with the adopted capital structure of the Company retroactively restated.

ISSUANCE OF COMMON STOCK

On March 12, 2004, Beijing Tenet Jove increased its registered capital in the amount of 8,500,000RMB ($1,026,571) thereby requiring its owners to invest additional capital. Inventory and intangibles were contributed in satisfaction of the increase.

Prior to the reverse merger, the Company issued 1,125,000 shares of its common stock for consulting services with a value of $2,250.

Pursuant to the reverse merger, the Company issued 6,800,000 shares of its common stock to acquire 100% of Beijing Tenet Jove.

On November 12, 2005 the Company effected a 1:2 reverse stock split. Immediately prior to the split there were 18,597,640 common shares outstanding and immediately following the split there were 9,298,823 common shares outstanding at December 31, 2004. Immediately prior to the split there were 2,747,640 common shares outstanding and immediately following the split there were 1,373,823 common shares outstanding at December 31, 2003.

RELATED PARTY TRANSACTIONS

Related party receivables consist of advances due from stockholders. The amounts bear no interest and are payable on demand. Balances at December 31, 2004 and 2003 are $79,046 and $0, respectively.

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Related party payables consist of loans from its stockholders. The loans bear no interest and are payable on demand. Balances at December 31, 2004 and 2003 are $588,201 and $255,862, respectively.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at December 31,

| Machinery

and equipment	2004 — $ 24,719	$	--
Vehicles	40,302		11,712
Office
equipment	65,762		1,352
Subtotal	130,783		13,064
Less:
accumulated depreciation	(25,535	)	(7,487	)
Net
property and equipment	$ 105,248	$	5,577

Depreciation expense was $20,671 and $2,276 for years ending December 31, 2004 and 2003, respectively.

INTANGIBLES

Intangibles consist primarily of manufacturing patent rights, acquired in the business combination with Tianjin as well as purchased trademark. They are determined to have a finite life of 10 years and are being amortized straight line over that period. Accumulated amortization at December 31, 2004 and 2003 is $6,466 and $0, respectively. Amortization expense recognized during 2004 and 2003 is $6,466 and $0, respectively.

NOTES PAYABLE

Notes payable bear interest between 10% and 18% and have maturities between three to twelve months from issue. At December 31, 2004 and 2003, principal balances of notes payable due within a year totaled $314,009 and $0, respectively. Accrued interest of $8,555 relating to theses notes was included in other payables at December 31, 2004.

CUSTOMER DEPOSITS

Customer deposits at December 31, 2004 consist of $409,945 in prepayments to the Company for merchandise that had not yet shipped. The Company will recognize the deposits as revenue as customers take delivery of the goods, in compliance with its revenue recognition policy.

COMMITMENTS

The Company leases factory and office space under non-cancelable leases. Future minimum lease payments are reflected in the following table:

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2005	$37,551
2006	32,660
2007	10,861
2008	--
2009	--
Total	$81,072

CONTINGENCIES

The Company has not, historically, carried any property or casualty insurance. No amounts have been accrued for any liability that could arise from the lack of insurance. Management feels the chances of such an obligation arising are remote.

STOCK WARRANTS

Pursuant to the Stock Purchase Agreement executed in conjunction with the reverse merger of the Company and Beijing Tenet Jove, a warrant for 5% of the outstanding stock of the Company, currently calculated to be 489,412 shares, was issued to the selling stockholders, exercisable at par value, and expiring on December 12, 2005. Certain information regarding outstanding and exercisable warrants is summarized as follows:

| Exercise P rice | Number O utstanding | Weighted Average Exercise Price | Weighted Average Life

Years | | --- | --- | --- | --- | | $0.001 | 489,412 | $0.001 | 1 |

NEW ACCOUNTING PRONOUNCEMENTS

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SUBSEQUENT EVENT

On November 12, 2005 the Company effected a 1:2 reverse stock split. Fractional shares were rounded up to the nearest whole share. Prior to the split 18,597,640 shares and 2,747,640 shares were issued and outstanding at December 31, 2004 and 2003, respectively. Subsequent to the split 9,298,823 shares and 1,373,823 shares were issued and outstanding at December 31, 2004 and 2003, respectively. These financial statements have been retroactively restated to show the effects of the stock split as if it occurred at the beginning of the earliest period presented.

RESTATEMENT

Subsequent to the issuance of the financial statements, management discovered an error related to the presentation of a trademark right. The result of the restatement is that trademark right previously reported as an other receivable is correctly reported as an intangible asset. The company now has made corrections and amortization. The company also discovered that the denominators used in calculating earnings per share were misstated, resulting in an overstatement of earnings per share in 2003.

Accordingly, consolidated balance sheets, statement of operations and statements of cash flows have been revised as follows.

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| | December 31, — Restated | Original | | --- | --- | --- | | | 2004 | 2004 | | ASSETS | | | | Current assets | | | | Cash and cash equivalents | $ 64,272 | $ 64,272 | | Trade receivables, net | 1,213,934 | 1,213,934 | | Other receivables | 324,426 | 386,595 | | Vendor deposits | 129,606 | 129,606 | | Prepaid expenses | 56,471 | 56,471 | | Inventories | 2,305,510 | 2,305,510 | | Total current assets | $ 4,094,219 | 4,360,973 | | Property, plant and equipment, net | 105,248 | 105,248 | | Related party receivables | 79,046 | 79,046 | | Intangibles, net | 182,472 | 20,291 | | Total assets | $ 4,460,985 | $ 4,360,973 | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | Current liabilities | | | | Trade payables | $ 1,144,012 | $ 1,038,910 | | Related party payables | 588,201 | 588,201 | | Accrued liabilities | 11,627 | 11,627 | | Other payables | 195,567 | 195,567 | | Notes payable | 314,009 | 314,009 | | Taxes payable | 87,535 | 87,535 | | Customer deposits | 409,945 | 409,945 | | Accrued employee benefits | 21,448 | 21,448 | | Total current liabilities | 2,772,344 | 2,667,242 | | Minority interest | 91,571 | 91,571 | | Commitments and contingencies | | | | Stockholders’ equity | | | | Common stock; par value $.001, 25,000,000 shares authorized; 9,298,823 and 1,373,823 issued and outstanding | 9,299 | 9,299 | | Additional paid in capital | 1,079,908 | 1,079,908 | | Retained earnings | 507,863 | 512,953 | | Accumulated other comprehensive income | -- | -- | | Total stockholders’ equity | 1,597,070 | 1,602,160 | | Total liabilities and stockholders’ equity | $ 4,460,985 | $ 4,360,973 |

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| | Year ended December 31, — Restated | Original | | | | --- | --- | --- | --- | --- | | | 2004 | 2004 | | | | Revenues | | | | | | Sales revenues | $ 2,102,219 | $ | 2,102,219 | | | Cost of goods sold | 829,099 | | 829,099 | | | Gross profit | 1,273,120 | | 1,273,120 | | | Operating expenses | | | | | | Advertising | 3,490 | | 3,490 | | | Bad debt expense | 165,766 | | 165,766 | | | Other selling expenses | 88,252 | | 88,252 | | | Salaries and benefits | 284,664 | | 284,664 | | | Depreciation and amortization | 27,104 | | 22,014 | | | Other general and administrative expenses | 263,046 | | 263,046 | | | Total operating expenses | 832,322 | | 827,232 | | | Operating income | 440,798 | | 445,888 | | | Other income (expense) | | | | | | Interest expense | (29,013 | ) | (29,013 | ) | | Income (loss) on equity investments | -- | | -- | | | Other | 408 | | 408 | | | Total other income (expense) | (28,605 | ) | (28,605 | ) | | Income before taxes and minority interest | 412,193 | | 417,283 | | | Provision for income taxes | 1,617 | | 1,617 | | | Income before minority interest | 410,576 | | 415,666 | | | Minority interest in income of subsidiaries | (1,840 | ) | (1,840 | ) | | Income from continuing operations | 408,736 | | 413,826 | | | Income from operations of disposed subsidiaries | 475 | | 475 | | | Gain on disposal of subsidiaries | 80,945 | | 80,945 | | | Net income from discontinued operations | 81,420 | | 81,420 | | | Net income | $ 490,156 | $ | 495,246 | | | Foreign currency translation adjustment | -- | | -- | | | Comprehensive income | $ 490,156 | $ | 495,246 | | | Basic earnings per common share: | | | | | | From continuing operations | $ 0.04 | $ | 0.04 | | | From discontinued operations | $ 0.01 | $ | 0.01 | | | From net income | $ 0.05 | $ | 0.05 | | | Diluted earnings per common share: | | | | | | From continuing operations | $ 0.04 | $ | 0.04 | | | From discontinued operations | $ 0.01 | $ | 0.01 | | | From net income | $ 0.05 | $ | 0.05 | | | Denominator for basic earnings per share | 9,298,823 | | 9,298,823 | | | Denominator for diluted earnings per share | 9,300,160 | | 9,298,823 | |

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| | Year ended December 31, — Restated | Original | | | | --- | --- | --- | --- | --- | | | 2004 | 2004 | | | | Cash flows from operating activities: | | | | | | Net income | $ 490,156 | $ | 495,246 | | | Adjustments to reconcile net loss to net cash used in operations: | | | | | | Depreciation and amortization | 27,137 | | 22,047 | | | Provision for allowance on receivables | 165,766 | | 165,766 | | | Inventory reserves | 111,092 | | 111,092 | | | Stock issued for services | 2,250 | | 2,250 | | | Minority interest | 1,840 | | 1,840 | | | Gain on disposal of subsidiary | (80,945 | ) | (80,945 | ) | | Changes in operating assets and liabilities: | | | | | | Trade receivables | (1,333,002 | ) | (1,333,002 | ) | | Other receivables | (380,590 | ) | (380,590 | ) | | Vendor deposits | (129,606 | ) | (129,606 | ) | | Prepaid expenses | (56,471 | ) | (56,471 | ) | | Inventories | (782,177 | ) | (782,177 | ) | | Trade payables | 904,428 | | 904,428 | | | Accrued liabilities | (148,231 | ) | (148,231 | ) | | Other payables | 195,567 | | 195,567 | | | Taxes payable | 87,535 | | 87,535 | | | Customer deposits | 409,944 | | 409,944 | | | Accrued employee benefits | 21,448 | | 21,448 | | | Net cash provided by (used in) operations | (493,859 | ) | (493,859 | ) | | Cash flows from investing activities: | | | | | | Related party receivables | (79,046 | ) | (79,046 | ) | | Proceeds from sale of subsidiary | 172,283 | | 172,283 | | | Purchase of property and equipment | (121,948 | ) | (121,948 | ) | | Net cash used in investing activities | (28,711 | ) | (28,711 | ) | | Cash flows from financing activities: | | | | | | Related party payables | 332,339 | | 332,339 | | | Repayments on short-term notes payable | (63,960 | ) | (63,960 | ) | | Proceeds from short term loans | 314,009 | | 314,009 | | | Net cash provided by (used in) financing activities | 582,388 | | 582,388 | | | Increase in cash and cash equivalents | 59,818 | | 59,818 | | | Cash and cash equivalents, beginning of period | 4,454 | | 4,454 | | | Cash and cash equivalents, end of period | $ 64,272 | $ | 64,272 | | | Supplemental disclosures of cash flow information: | | | | | | Cash paid for interest | $ 20,458 | $ | 20,458 | | | Cash paid for income taxes | $ -- | $ | -- | | | Supplemental disclosures of non-cash investing and financing activities: | | | | | | Stock issued for services | $ 2,250 | $ | 2,250 | | | Inventory and intangibles acquired as additional paid in capital | $ 1,026,571 | $ | 1,026,571 | |

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| | Year ended December 31, — Restated | Original | | --- | --- | --- | | | 2003 | 2003 | | Basic earnings per common share | | | | From continuing operations | $ -- | $ -- | | From discontinued operations | $ -- | $ 0.01 | | From net income | $ -- | $ 0.01 | | Diluted earnings per common share | | | | From continuing operations | $ -- | $ -- | | From discontinued operations | $ -- | $ 0.01 | | From net income | $ -- | $ 0.01 | | Denominator for basic earnings per share | 9,298,823 | 1,373,823 | | Denominator for diluted earnings per share | 9,298,823 | 1,373,823 |

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

There have been no disagreements with accountants on accounting matters or financial disclosure.

ITEM 8A. CONTROLS AND PROCEDURES

Evaluation of Controls . As of December 31, 2004, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls"). This evaluation (“Evaluation”) was performed by our Chairman and Chief Executive Officer, Mr. Yuying Zhang, who is the principal executive officer of our Company (known as “CEO”), and our Chief Financial Officer, Dan Liu, who is our principal financial officer (“CFO”). In addition, we have discussed these matters with our securities counsel. In this section, we present the conclusions of our CEO and CFO based on their Evaluation as of December 31, 2004, with respect to the effectiveness of our Disclosure Controls.

CEO and CFO Certifications . Attached to this annual report, as Exhibits 31.1 through 31.2, are certain certifications of the CEO and CFO, which are required in accordance with the Exchange Act and the Commission's rules implementing such section (the "Rule 13a-14(a)/15d-14(a) Certifications"). This section of the annual report contains the information concerning the Evaluation referred to in the Rule 13a-14(a)/15d-14(a) Certifications. This information should be read in conjunction with the Rule 13a-14(a)/15d-14(a) Certifications for a more complete understanding of the topic presented.

Disclosure Controls . When we refer to Disclosure Controls in this document, we mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Disclosure Controls to which we refer do not necessarily include internal controls over financial reporting, as defined by Exchange Act Rule 13a-15(f) and 15d-15(f). We have not yet conducted a separate evaluation of our internal controls over financial reporting, because we are not required by law to do so according to SEC Release no. 33-8760, until our first fiscal year ending after December 15, 2007. We intend to comply with such reporting and evaluation at that time and all times thereafter.

Limitations on the Effectiveness of Controls . Our management does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well developed and operated, can provide only reasonable, but not absolute, assurance that the objectives of the Disclosure Controls are met. Further, the design of the Disclosure Controls must reflect the fact that there are resource constraints, and the benefits of Disclosure Controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of Disclosure Controls can provide absolute assurance that all Disclosure Control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, Disclosure Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the Disclosure Controls. The design of a system of Disclosure Controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions. Over time, Disclosure Controls may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective system of Disclosure Controls, misstatements due to error or fraud may occur and not be detected, or may be detected later than expected.

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Scope of the Evaluation . The CEO and CFO's evaluation of our Disclosure Controls included a review of the controls' (i) objectives, (ii) design, (iii) implementation, and (iv) the effect of the controls on the information generated for use in this annual report. In the course of the Evaluation, the CEO and CFO sought to identify data errors, control problems, acts of fraud, and they sought to confirm that appropriate corrective action, including process improvements, was being undertaken. This type of evaluation is done on a quarterly basis so that the conclusions concerning the effectiveness of our Disclosure Controls can be reported in our quarterly reports on Form 10-QSB and annual reports on Form 10-KSB. The overall goals of these various evaluation activities are to monitor our Disclosure Controls, and to make modifications if and as necessary. Our intent in this regard is that the Disclosure Controls will be maintained as dynamic systems that change (including improvements and corrections) as conditions warrant.

Conclusions. Based upon the Evaluation, our CEO and CFO have concluded that, as of December 31, 2004, our Disclosure Controls are effective at that reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported to management, including the CEO and CFO, within the time periods specified in the Commission's rules and forms, and that our Disclosure Controls are effective at that assurance level to provide reasonable assurance that our financial statements are fairly presented in conformity with accounting principles generally accepted in the United States. Additionally, there has been no change in our Disclosure Controls that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to affect, our Disclosure Controls.

ITEM 8B. Other Information

N/A

Part III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The directors and executive officers currently serving the Company are as follows:

| Name | Age | Position(s) Held | | --- | --- | --- | | Yuying Zhang | 53 | Chairman & CEO | | Weixing Yin | 47 | Director | | John R. Rice | 60 | Director | | Tian Shuanpeng | 54 | Director | | Liu Guiquing | 49 | Director | | Zhang Xiaoquang | 54 | Director | | Wen Lin | 28 | Secretary |

The directors named above will serve until the next annual meeting of the Company's stockholders. Thereafter, directors will be elected for one year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. There is no arrangement or understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer.

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Yuying Zhang, age 53, Chairman and CEO. Mr. Zhang has been chairman and general manager of Beijing Tenet Jove Technological Development Co., Ltd. since December 2003. From 1995 until December 2003, he served as general manager of Tianjin Balas Technological Development Co., Ltd. Mr. Zhang is a graduate of China Central Radio and Television University in China.

Weixing Yin, Director age 47. Mr. Yin has served as deputy chairman of Beijing Tenet Jove Technological Development Co., Ltd. since 2003. From 1996 until 2003, he was the general manager of Beijing Superstar Culture and Communication Center. Mr. Yin is a graduate of the Beijing College of Art in Beijing, China.

John R. Rice, Director, age 60. Mr. Rice received a Bachelor of Arts degree in Liberal Arts from the University of Miami in Miami, Florida, in 1964. From 1975 to 1989, he was a principal of John R. Rice Associates, Inc., a New York-based business consulting and finance company that initially focused on asset based debt placements and expanded to include medical equipment lease financing with clients including, among others, Johnson and Johnson Technocare Division, Seimens Company, Picker Company, GE Capital, Marine Midland Bank, and various medical equipment-based Limited Partnerships. Mr. Rice became active in organizing, promoting and managing several Limited Partnerships. Mr. Rice is a founder, managing member and principal of Capstone & Company, LLC, a financial service company, and its affiliates. He oversees international marketing of Capstone's programs and services to investors and joint venture partners, and is also responsible for capital formation for the Capstone group of companies.

Shuangpeng Tian, Director, age 54. Mr. Tian has been Vice-Chairman of the Board for of Beijing Tenet Jove Technological Development Co., Ltd. since December 2003 and director of Tianjin Tenethealth Technological Development Co, Ltd. since July 2003. His responsibilities at Shineco include participating in corporate decision-making as a member of the Board of Directors. Concurrently with his service on the Tenet Jove and Tenethealth boards of directors, Mr. Tian has also served as Vice Chairman of Tianjin Kinghealth Techological Development Co., Ltd., from December 2003 to the present. From August 1994 to the present, he has also served as General Manager of Renqiu Electric Power Company in Hebei Province. Mr. Tian received his Bachelor’s degree in Electronic Engineering from Xi’an JiaoTong University.

Guiquing Liu, Director, age 49. Ms. Liu was Vice President of the Madian Savings Office of the Industrial and Commercial Bank of China, Beijing Branch, from March 2001 to December 2003. She has served as Vice-General Manager and Chief Financial Officer of the Beijing Great Wall Construction Engineering Co., Ltd. since December 2003. She has served as a director of Beijing Tenet Jove Technological Development Co., Ltd. since July 2003.

Xiaoguang Zhang, Director, age 54. Concurrently with his duties on our board of directors, Mr. Zhang has also served as President of Beijing Zhong Mei Rong Guang Investment Consulting Co., Ltd. since November 2003. From August 2000 to November 2003, Mr. Zhang was Vice President of Dongfang Haoyu Investment Group, in charge of investment services. Before that, beginning in April 1992, he served as Supervising Department Director of the Industrial and Commercial Bank of China. Mr. Zhang has over 20 years experience in dealing with securities and financing transactions. He has served as a director of Beijing Tenet Jove Technological Development Co., Ltd. since 2004.

Lin Wen, Secretary age 28. Miss Lin Wen has served as Director of Administration and Management Center of Beijing Tenet Jove Technological Development Co., Ltd. since January 2004. From July 2002 to December 2003, she worked as Director of general office of Sales Company of Shandong Chenming Paper Holdings Ltd., and from July 2000 to June 2002 as assistant to general manager of Hangzhou Wahaha Group Co., Ltd. Miss Wen received a bachelor's degree in Economics from Chongqing University in 2000.

Compliance with Section 16(a) of the Exchange Act

The above-named officers and directors of the Company were each required to file Initial Statement of Beneficial Ownership of Securities on Form 3 at the time they acquired their ownership in the Company’s stock. They have each represented to the Company that they will complete all required filings under Section 16(a) on or before August 15, 2005.

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ITEM 10. EXECUTIVE COMPENSATION

Other than reimbursement for expenses no officer or director received any remuneration from the Corporation during the fiscal year ended December 31, 2004, except for Yuying Zhang, who received annual compensation of $11,600. Directors of the Company do not receive any compensation. See “Certain Relationships and Related Transactions.” The Company has no stock options, retirement pension or profit-sharing program for the benefit of directors, officers, or other employees, but the Board of Directors may recommend adoption of one or more of such programs in the future.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of June 30, 2005, the number of shares of common stock owned of record, and beneficially by executive officers, directors and persons who hold 5% or more of the outstanding Common Stock of the Company. Also included are the shares held by all executive officers and directors as a group.

| Name | Address | Number of Shares | Percentage | | --- | --- | --- | --- | | Yuying Zhang | Suite 1203, Dixiang Garden of Wanke Xincheng Garden, Xin Yibai Avenue, Beichen District, Tianjin, China, PC: 300402 | 2,715,148 | 29.36 | | Min Zhao | Suite 1203, Dixiang Garden of Wanke Xincheng Garden, Xin Yibai Avenue, Beichen District, Tianjin, China, PC: 300402 | 1,810,099 | 19.57 | | Shuangpeng Tian | Electric Power Bureau of Renqiu City, Hebei Province, China, PC:062550 | 1,176,564 | 12.72 | | Guocong Zhou | Suite 233, 5 Nongfengli, North Chaoyang Street, Chaoyang District, Beijing, China, PC: 100020 | 1,176,564 | 12.72 | | Weixing Yin | Suite 1704, Building 1, Modern City, 88 Jianguo Street, Chaoyang District, Beijing, China, PC: 100022 | 814,545 | 8.8 | | Li Shi | Suite 401, Entrance 2, Building 26, Dinghuisi Dongli, Haidian District, Beijing, China, PC: 100036 | 814,545 | 8.8 | | Liu Guiqing | Suite 10, Entrance 7, 7 Fenzi Hutong, Xicheng District, Beijing, China, PC: 100032 | 543,030 | 8.7 | | John R. Rice | 515 Madison Avenue, New York, NY 10022 | 19,226 | 2.08 | | All officers and directors as a group (5 persons): | | 5,268,513 | 56.66 |

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There have been no transactions within the last two fiscal years in which the Company was a party, in which any director, executive officer, nominee for executive officer, director, or any material security holder, holding more than 5% of the shares, or any member of the immediate family of any of those persons, have a direct or indirect material interest.

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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The Exhibits listed below are filed as part of this Annual Report.

Exhibit No.

| 3.1 | Articles of Incorporation (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on August 24, 2004). | | --- | --- | | 3.1a. | Articles of Amendment of Articles of Incorporation. | | 31.1 | Certification Under Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2 | Certification Under Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1 | Certification Under Section 906 of the Sarbanes-Oxley Act of 2002 | | 32.2 | Certification Under Section 906 of the Sarbanes-Oxley Act of 2002 |

(b) The Company filed a report on Form 8-K during the quarter ended December 31, 2004 on December 9, 2004.

ITEM 14. Principal Accountant Fees and Services

Audit Fees

Child, Sullivan & Company, the predecessor firm to Child, Van Wagoner & Bradshaw, PLLC, provided audit services to us for our annual reports for the fiscal years ended December 31, 2004 and 2003. The aggregate fees billed by them for the audit of our annual financial statements and review of financial statements including 10-QSBs was approximately $27,500.

Audit-Related Fees

There were no fees billed in 2004 for professional services that are reasonably related to the audit or review of our financial statement that are not covered in the Audit Fees disclosure above.

Tax Fees

There were no fees billed for the year 2004 for professional services rendered by our auditors for tax advice and planning.

All Other Fees

There were no fees billed for the year 2004 for professional services rendered by our auditors for all other services not disclosed above.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY; SIGNATURE PAGE TO FOLLOW]

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SIGNATURES

In accordance with Section 13 or (15d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunder duly authorized.

Dated: April 16, 2007

SUPCOR, INC. now known as SHINECO, INC.

/s/ Yuying Zhang

By: Yuying Zhang

Chairman and CEO (Principal Executive Officer)

/s/ Dan Liu

By: Dan Liu

CFO (Principal Financial Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

| /s/

Yuying Zhang	04/16/07
Yuying
Zhang, Chairman
/s/
Shuanpeng Tian	04/16/07
Shuanpeng
Tian, Director
/s/
Weixing Yin	04/16/07
Weixing
Yin, Director
/s/
Guiquing Liu	04/16/07
Guiquing
Liu, Director
/s/
Xiaoquang Zhang	04/16/07
Xiaoquang
Zhang, Director

33 -

Exhibit 3.1a

CERTIFICATE OF AMENDMENT

OF THE

CERTIFICATE OF INCORPORATION

SUPCOR, INC.

UNDER SECTION 242 OF THE

CORPORATION LAW OF THE STATE OF DELAWARE

SUPCOR, INC. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of said corporation, by written consent filed with the minutes of the Board, adopted the following resolutions proposing and declaring advisable the following amendments to the Certificate of Incorporation of said corporation:

“1. That Article FIRST of the Certificate of Incorporation be amended and, as amended, read as follows:

‘FIRST: The name of the Corporation is SHINECO, INC.’ ”

SECOND: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.

THIRD: Prompt notice of the taking of this corporate action is being given to all stockholders who did not consent in writing, in accordance with Section 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Yuying Zhang, its President, this 18th day of May 2005.

SUPCOR, INC.

By: /s/ Yuying Zhang, President

Yuying Zhang, President

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SHINECO, INC. Annual Report 2007

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SHINECO, INC. — Annual Report 2007

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