**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON
      D.C. 20549








**FORM
      10-KSB**








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


For
      the
      fiscal year ended **December 31, 2005**








 ̈  **TRANSITION
      REPORT PURSUANT TO 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)








**Room
      3106, Building B,**


**#39
      East 3rd Ring Middle Road, Chaoyang District**


(Address
      of Principal Executive Office - street and number)








**Beijing,
      PR China 100022**


(City,
      State and ZIP Code)








Issuer's
      telephone number: **(0086)
      10-58693011**








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








Securities
      registered under Section 12(g) of the Act: **Common Stock $.001 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 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: $2,243,047





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 March 15, 2007.





CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING INFORMATION





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.





-
          2
          -


**SHINECO,
      INC.**


Form
      10-QSB


**INDEX**





**Page
                No.****PART
                I**Item
                1. Description of Business
            4Overview
            4Products
            5Manufacturing
            6Intellectual
                Property
            9Sales
                and Marketing
            11Market
            12Competition
            12Administrative
                Offices
            14Employees
            
            14Item
                2. Properties
            15Item
                3. Legal Proceedings
            15Item
                4. Submission of Matters to a Vote of Security Holders
            15**PART
                II**Item
                5. Market for Registrant’s Common Equity and Related Stockholder
                Matters
            15Item
                6. Management’s Discussion and Analysis or Plan of
                Operation
            15Item
                7. Financial Statements
            19Item
                8. Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure
            37Item
                8A. Controls and Procedures
            37**PART
                III**Item
                9. Directors, Executive Officers, Promoters and Control
                Persons
            38Item
                10. Executive Compensation
            40Item
                11. Security Ownership of Certain Beneficial Owners and
                Management
            41Item
                12. Certain Relationships and Related Transactions
            41Item
                13. Exhibits and Reports on Form 8-K
            41Item
                14. Principal Accountant Fees and Services
            42Signatures
            
            43





-
          3
          -


**PART
      I**





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





**BUSINESS
      OVERVIEW**





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.





Our
      Tenet-Jove subsidiary was organized under the laws of the People’s Republic of
      China in 2003 and is headquartered in Beijing.





In
      August, 2006, Beijing Tenet-Jove successfully acquired business certificates
      from China’s Ministry of Commerce, The State Administration of Foreign Exchange,
      The Beijing Administration For Industry & Commerce, The Beijing Municipal
      Office, and The State Administration of Taxation. It has therefore completed
      the
      legal process of acquisition under both Chinese and US law.





Tenet-Jove
      currently develops, manufactures and distributes textiles and health supplements
      derived from a native Chinese plant known in Chinese as “Luobuma” (scientific
      name: Apocynum
      venetum ).
      We
      currently market and distribute our Apocynum products in China’s growing economy
      through our national marketing network. Our Apocynum products are specialized
      textile and health supplement products designed to incorporate traditional
      Eastern medicines with modern scientific methods. Our products are 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.





We
      do not
      manufacture, distribute, or sell any of our products in the United States or
      Canada.





**BUSINESS
      OF THE COMPANY**





The
      Company’s principal products are derived from the Chinese Luobuma plant
      ( Apocynum
      venetum ).
      This
      plant has a long history in Chinese herbal medicine and is documented in Li
      Shizhen’s Compendium
      of Materia Medica (Chinese: Bencao Gangmu), first published in 1578 A.D. It is one of the most
      famous encyclopedias ever written on Chinese herbal medicine, and it is still
      used as a reference work by herbal medicine practitioners today. In China,
      Luobuma has been used both internally and externally for centuries to treat
      high
      blood pressure, depression, dizziness, pain, insomnia, and other
      ailments.





History
      and Development of Far-Infrared Radiant Textiles





Our
      company’s scientists and other Chinese researchers have brought modern
      scientific methods to the study of Apocynum
      venetum ’s
      characteristics, and we have discovered that Apocynum fibers have an increased
      tendency to radiate light at the “far infrared” end of the light spectrum, with
      wavelengths measuring between 8-15 microns (referred to as “FIR”). Chinese
      scientific studies have observed that Apocynum’s FIR-radiating qualities exert a
      positive effect on various functions of the human body, including cellular
      metabolism.


-
          4
          -


For
      example, tests conducted by the P.R.C.’s National Institute of Metrology have
      reported that the radiance rate of far infrared light from Apocynum fiber is
      84%, 2 to 4 times higher than that from cotton and other natural fibers. The
      same tests found that the FIR radiance rate from our proprietary bio-ceramic
      powder reaches 91%. Healthful benefits have been observed at levels above
      70%.





Based
      on
      these observations about FIR radiance, we have developed textiles that our
      customers can wear and from which they can receive health benefits commonly
      associated with Chinese herbal remedies.





First
      Generation .
      We were
      not the first to discover FIR-radiant textiles. The “First Generation” of
      FIR-radiant textiles initially became popular in China around 1989, when
      manufacturers learned to add 3% of a FIR-radiant inorganic material to synthetic
      fibers comparable to nylon or polyester. This “First Generation” FIR material
      employs a relatively low level of technology and has relatively few health
      benefits.





Second
      Generation .
      However, Tenet-Jove was one of the first companies in China to commercially
      develop the natural FIR-radiant properties of the Apocynum
      venetum plant.
      We refer to this natural Apocynum fiber as a “Second-Generation” FIR
      textile.





Our
      newly
      developed Apocynum fabrics have been a success in the Chinese market, generating
      gross sales of over US$4 million in 2004 and 2005 alone. The technology applied
      to our Apocynum-based FIR Therapeutic Clothing and Textile Products has received
      a “Special Golden Award” from the China National Intellectual Property Bureau at
      China’s National Patent and Brand Expo. Our products under the brand name of
“Tenethealth®” have also been honored with the title of “Consumer’s Favorite
      Products” by the Chinese Consumer Association.





Part
      of
      the appeal of the natural Apocynum FIR material is that its fibers can contain
      up to 32 additional medicinal compounds, many of which are familiar to
      practitioners of traditional Chinese medicine. In addition, our processes for
      manufacturing Apocynum textiles produce a fabric that is smooth, air-permeable,
      and soft.





Third
      Generation .
      We are
      also developing a “Third Generation” of FIR textiles under a contract with the
      Institute of Process Engineering at the Chinese Academy of Sciences, one of
      the
      leading scientific institutions in China. Our current research and development
      focuses on adding nanotechnology enhancements to our Apocynum textile products,
      in which we use small-scale nanotechnology to embed or impregnate our
      Apocynum-fiber textiles with other FIR-radiant materials, bio-ceramic materials,
      or other Chinese herbal remedies.





Using
      these nanotechnology methods, we plan to develop and market health-promoting
      textile goods that function in a manner analogous to a nicotine patch: the
      textiles manufactured with the Company's Apocynum fabrics are impregnated with
      FIR-radiant materials or other Chinese herbal remedies, which are then absorbed
      through the wearer's skin.





**PRODUCT
      DESCRIPTIONS**





The
      Company presently has approximately 100 products based on the Apocynum plant
      or
      FIR technology. These products range from herbal teas to textiles, blankets,
      pillows, and clothing. We have classified our products into 3 series, described
      as follows:





-
          5
          -


**1-** **Apocynum
      Fiber Textiles**





The
      products in this category include:





-
            Far
                Infrared bedding sets (including various pillows, comforters, and
                sheets)


-
            Far
                Infrared underwear, T-shirts, and socks


-
            Far
                Infrared waist supports


-
            Far
                Infrared body wraps or protectors (for the ankle, elbow, wrist, and
                knee)


-
            Far
                Infrared blankets





All
      Far
      Infrared textile products are made of Apocynum-based fibers and are impregnated
      with bio-ceramic powder. Both the fiber and the bio-ceramic powder are developed
      with the Company’s proprietary techniques and have been protected with
      patents.





Sales
      from this category comprised about 83% of our overall sales revenue in
      2005.





**2-** **Apocynum
      Nutritional Supplements**





The
      products in this category include:





-
            Apocynum
                Tea,


-
            Apocynum
                Royal Jelly Honey,


-
            Tenet
                Bojian Capsule





The
      Apocynum tea and honey contain active medical constituents extracted from
      Apocynum plants through the Company’s proprietary procedure. The products have
      shown benefits in regulating blood pressure and blood lipids, relieving cough,
      removing phlegm, and relieving inflammation.





Sales
      from this category comprised about 11% of our overall sales revenue in 2005
      (since the Tenet Bojian Capsule was just launched, its sales were not
      considered).





**3-** **Home-Use
      Therapeutic Equipment (Using FIR Technology)**





Recently,
      we have developed a Multifunction Low Frequency Therapy System which
      incorporates our understanding of the benefits derived from far infrared (FIR)
      technology. The Multifunction System is a home-use medical appliance that emits
      far infrared light and low frequency electric pulses to specified areas of
      body
      as designated in traditional Chinese meridian theory. Like our other products,
      it is a combination of ancient traditional medicine and modern technology.
      The
      product can stimulate reactive areas on a user’s hand or foot, or it can
      stimulate acupuncture points according to the traditional Chinese understanding
      of energy meridians in the body.





Home-use
      therapeutic equipment products are in the introductory stage.





Sales
      from this category comprised about 5% of our overall sales revenue in
      2005.





**MANUFACTURING
      AND PRODUCTION FACILITIES**





All
      of
      our products are developed and manufactured in our research, development and
      manufacturing facility in Tianjin, China. We have also formed strategic
      alliances with several certified knitting and clothing manufacturers. We assign
      them limited manufacturing jobs and require certain conditions, including
      protecting our proprietary techniques and meeting our quality
      standards.


-
          6
          -


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, Xinjiang
      Province, to provide raw materials and semi-finished products to the
      company.





**OUR
      RESEARCH AND DEVELOPMENT**





Our
      Research and Development Center in Tianjin is owned by our subsidiary,
      Tenet-Jove, and is headed by Dr. Li Zhenhao, a Chinese Medical Doctor and a
      member of Tenet-Jove’s Board of Directors. The Center is managed by 7 other
      senior research fellows, who specialize in different but related scientific
      fields, such as biochemistry, electrical engineering, textile engineering,
      medical and clinical studies, and pharmaceuticals. In the last few years, new
      technologies developed by our R & D Center have been awarded 13 patents from
      the China National Patent Bureau. 2 of them received a special “Golden Award” at
      the China National Patent and Brand Expo.





We
      are
      engaged in R&D of new products under cooperation with universities and
      research institutions.





**Our
      Strategy for Research and Development**





·
            To
                keep our products proprietary and patented;


·
            To
                focus on our core product lines: Apocynum-based products, FIR technology,
                and herbal medicines;


·
            To
                build strategic alliances with other universities and scientific
                institutions.





The
      Company specializes in developing Apocynum products and combining FIR technology
      with natural herbal medicines. The Company’s continued success will depend on
      improving its techniques to industrialize Apocynum by developing a series of
      Apocynum-derived products such as Apocynum functional fiber and Apocynum
      nutritional supplements.





We
      estimate that there are large supplies of Apocynum in China’s Xinjiang Province.
      Currently, these supplies are largely undeveloped. The local government has
      developed favorable policies to encourage development of businesses in this
      region.





**A
      Key Element in Our Strategy: A High-Pressure Steam Degumming
      Process**





We
      currently produce an extensive line of Apocynum-based textile products; we
      have
      exclusive patents on Apocynum fiber technology and yarn spinning methods; and
      we
      hold proprietary rights to several FIR mineral herbal medicines. However, one
      main factor that holds us back from developing the large-scale production of
      Apocynum fiber products is the limited yield of Apocynum fiber and the high
      cost
      of obtaining that fiber. A central technical challenge is how to quickly and
      efficiently remove the gum and sap from the Apocynum plants so that only the
      natural fiber remains.





To
      solve
      this problem, in August 2006 we signed a Technology Development Contract with
      the Institute of Process Engineering at the Chinese Academy of Science, one
      of
      China’s leading scientific institutes. According to our contract, the Institute
      of Process Engineering will work with us to develop a high-pressure steam
      degumming process for the mass production of Apocynum fiber, as well as its
      byproducts. A literal translation of the project name is “The Stream Steam
      Explosion Project.” Essentially, the project will develop a method for quickly
      blasting a large amount of high-pressure steam into a large container filled
      with raw Apocynum plants. The steam will remove the gum and sap and leave the
      fiber for use in textile production. The gum and sap and other Apocynum
      byproducts will be washed out with the steam and collected in a separate place
      for other uses.





-
          7
          -


According
      to the contract, the Institute will complete initial laboratory experiments
      within four months. If the initial laboratory experiments are successful, an
      enlarged series of experiments will be undertaken. If the enlarged series of
      experiments turns out to be successful, we expect that our annual yield of
      Apocynum fiber will rise by over 30 times—from lower than 100 tons to 3000 tons
      per year, and the cost of extracting the fiber will be reduced by 50-60%. During
      the Stream Steam Explosion process, a certain amount of steam will be used,
      but
      no poisonous water will be discharged, because the fiber will be collected
      in
      one place, and the liquefied gum and sap and other material will be collected
      in
      another place for herbal medicinal uses. This technique is relatively simple
      and
      convenient to operate. Apocynum fiber produced by this technique is more like
      cotton and more spinnable than before.





We
      are
      not the only ones optimistic about the Stream Steam Explosion project. It has
      been put on the list of National Key Basic Research Programs (also known as
      the
“973 Program,”) founded by China’s Ministry of Science and Technology. The
      Apocynum Stream Steam Explosion Degumming Technique is one of the most important
      parts of this project. This project is currently being carried out by the
      Institute of Process Engineering at the Chinese Academy of Sciences under the
      direction of Mr. Cheng Hongzhang, Chief Scientist, Doctor Advisor, and Deputy
      Dean of the Bio-chemical laboratory at China’s National Key Basic Research
      Program.





To
      promote the success of this project, the Institute of Process Engineering at
      the
      Chinese Academy of Sciences has been conducting systematic studies and
      experiments on hemp degumming for ten years. This scientific research has been
      conducted specifically to achieve a technologically feasible method of
      generating large-scale, low-cost Apocynum fiber production.





**Products
      Currently In Development:**





a)
            Byproducts
                from Apocynum Processing





Through
      our cooperative agreement with the Institute of Process Engineering at the
      Chinese Academy of Sciences, and by applying the Company’s patents and
      proprietary FIR materials, the Company is developing third-generation Apocynum
      fiber products and a series of byproducts, such as Apocynum CC fiber, Apocynum
      medicines, Apocynum degraded fiberboard, pectin, alcohol, and
      fertilizer.





b)
            Nano-engineered
                Apocynum Fabrics





In
      our
      FIR Therapeutic Product Line, we plan to introduce third-generation FIR
      functional fabrics, such as nano-engineered Apocynum fabrics, in cooperation
      with the National Center for Nanoscience and Technology, China (NCNST). We
      are
      researching how to develop medicine-embedded Apocynum fiber products that will
      combine Apocynum medicinal fibers with nanoscale technology to improve the
      comfort and performance of Apocynum textiles. We plan to launch our first
      nano-engineered Apocynum fabrics into the market by 2007 or 2008.





c)
            Apocynum
                Milk Tablets





Tenet-Jove
      is developing this nutritional supplement jointly with Australia’s Montro Dairy
      Company. The raw materials for the tablets are Apocynum herb extracts and
      low-fat milk. The ingredients are processed into Apocynum milk tablets. This
      kind of tablet contains monounsaturated fatty acids and more than 30 herbal
      medicinal compounds.


-
          8
          -





d)
            Apocynum
                Capsule





These
      capsules will contain medicinal compounds derived from Apocynum stems and leaves
      through a botanical extracting process. We currently believe that capsules
      could
      have some effect in improving immunity and relieving the symptoms of high blood
      pressure, high levels of blood lipids and other cardio-vascular
      diseases.





e)
            Apocynum
                and Chlorella Tablet





Apocynum
      is composed of more than 30 medicinal ingredients, while Chlorella’s capacity
      for photosynthesis is significantly higher than that of many other plants.
      Chlorella produces a large amount of protein, which we currently estimate at
      about 38 times that of soy beans, and about 55 times that of rice. It could
      be
      used by some traditional herbalists in connection with numerous blood
      ailments.





f)
            Medical
                Absorbable Suture





This
      material, like all our products, is not being sold in the United States or
      Canada. It is not subject to US food and drug laws. The main material in the
      Medical Absorbable Suture comes from abyssal fauna fiber, one of the same
      sources from which water-soluble Chitosan is distilled. Our suture’s advantages:
      no need to remove the sutures, because they can be absorbed by the human body;
      they leave a less noticeable scar on the body; and they have an antibacterial
      quality. Laboratory experiments on the suture have been concluded in China,
      and
      small quantities are being produced for use in Chinese clinical trials according
      to Chinese medical protocols. This technology has been granted a national patent
      in China.





g)
            Double
                Layer Synthetic Skin





According
      to our limited Chinese clinical studies, this product works well on patients
      with large-area burns or scalds, and it improves the healing time of a wound.
      We
      developed this product from Chitosan. It has been observed to resist infection,
      promote new cell growth and accelerate wound healing. The technology for our
      double-layer synthetic skin has been granted a patent in China.





**INTELLECTUAL
      PROPERTY**





Trademarks :
      We
      market our products under our brand name of “Tenethealth®” and “Tenet BojianTM.”
In Chinese, “Tenet” means “Benefit from Nature.” We currently own these
      trademarks.





Patents :
      Our
      core technology and its derivative applications are covered by the company’s 12
      patents filed in China. Our patents relate to methods of extracting and
      processing the Apocynum fiber itself, as well as our formulations of the active
      medicinal constituents of the Apocynum plant. Several major Chinese hospitals
      have conducted extensive human clinical studies of the safety and efficacy
      of
      our therapeutic products, and these studies have reported favorable
      conclusions.





-
          9
          -


Presently
      the company has obtained patents in the People’s Republic of China
      for:





·
            Apocynum
                fiber blending method (patent number: ZL
                941120295)


·
            Far-infrared
                ceramic material (patent number: ZL
                981261701)


·
            Apocynum
                far-infrared multifunctional surface material (patent number: ZL
                992144736)


·
            40*
                fine Apocynum cloth (patent number: ZL
                023381736)


·
            Apocynum
                far-infrared foot pillow (patent number: ZL 2004 2
                0092818.8)


·
            Apocynum
                far-infrared noon pillow (patent number: ZL 2004 2
                0092815.4)


·
            Apocynum
                far-infrared healthcare socks with mineral Chinese medicine (patent
                number: ZL 2004 2 0029463.2)


·
            Apocynum
                cushion with magnetic therapy (patent number: ZL 2004 2
                0028883.9)


·
            Heart-protecting
                card (patent number: ZL 2004 2
                0028885.8)


·
            Apocynum
                cotton terry blanket (patent number: ZL 2004 2
                0029465.1)


·
            Apocynum
                four-season mat (patent number: ZL 2004 2
                0029462.8)


·
            Apocynum
                flannelette blanket (patent number: ZL 2004 2
                0029464.7)





**DISTRIBUTION
      NETWORK**





We
      market
      our products through our growing distribution network, which at the end of
      2005
      consisted of 8 large distributors who distributed our products to a total of
      518
      outlets, including flagship stores, retail stores and sales counters. These
      8
      distributors sell our products in the 8 biggest regional markets in mainland
      China. They all carried our proprietary brand name and “Tenethealth” trademark
      in 2005. Apart from these 8 major distributors, the Company also distributed
      its
      products to an additional 1,390 retail stores and sales counters throughout
      China. Thus, in 2005, the Company placed its products in a total of 1,908 retail
      stores and sales counters throughout China.





Our
      sales
      and distribution strategy focuses on expanding our distribution network of
      retail stores and sales counters into all major provinces and cities of China.
      We also plan to use our current distribution network to introduce our newly
      developed products into target markets more efficiently and
      effectively.





As
      of the
      end of 2005, the Company had 8 major distributors in 8 of China’s major markets.
      The Company held a minority equity participation in each of these major
      distributors (see details in Table 1). There were a total of 518 outlets under
      these 8 distributors, including flagship stores, retail stores and sales
      counters throughout China. The 8 distributors were responsible for expanding
      business inside their target markets, building branch stores, and meeting sales
      targets. The Company provided information and training about its lines of
      products to these 8 distributors as well as to various sales staff at individual
      stores and sales counters, and the Company exercised its contractual right
      to
      audit the financial condition of some or all of these distributors in order
      to
      protect its minority equity investment in their operations.


-
          10
          -


**Table
      1**





Name
                of Distributor’s Market
            
            Our
                Equity Participation
            
            Date
                We Began Participation1.
                Jinan
            
            25%
            
            11/25/20052.
                Changchun
            
            25%
            
            10/26/20053.
                Yantai
            
            25%
            
            10/26/20054.
                Liaoyang
            
            25%
            
            12/31/20055.
                Xuzhou
            
            15%
            
            7/26/20056.
                Huaian
            
            15%
            
            7/26/20057.
                Shenyang
            
            15%
            
            9/26/20058.
                Shenzhen
            
            15%
            
            12/31/2005





In
      addition to the 8 major distributors in whom the Company held a minority equity
      position, the Company distributed its products to many more sales outlets in
      which the Company held no equity position. These “certified outlets” of the
      Company’s products included approximately 1,390 retail stores and sales counters
      across 13 provinces of China. All of these certified outlets operate
      independently, but they prominently display our trade names “Tenethealth®” and
“Tenet BojianTM.” These independent retailers sell our products as well as other
      products.





The
      location and number of retail stores and sales counters selling our products,
      including all sales outlets (both those connected with our 8 major distributors
      and other independent sellers) are listed below:





Name
                of Province
            
            Number
                of Major Distributors
            
            Number
                of Flagship Stores
            
            Total
                Number of Certified OutletsHeilongjiang
            
            1
            
            6
            
            367Liaoning
            
            1
            
            4
            
            224Jilin
            
            1
            
            3
            
            184Shandong
            
            2
            
            3
            
            107Jiangsu
            
            2
            
            5
            
            203Anhui
            
            0
            
            3
            
            293Gansu
            
            0
            
            1
            
            111Shaanxi
            
            0
            
            2
            
            82Qinghai
            
            0
            
            0
            
            37Xinjiang
            
            0
            
            1
            
            77Sichuan
            
            0
            
            0
            
            59Guangdong
            
            1
            
            2
            
            96Tianjin
            
            0
            
            1
            
            68TOTALS
            
            8
            
            31
            
            1,908





**SALES
      AND MARKETING**





The
      Company’s sales are generated through the following five major
      channels:





1.
            Retail
                stores and sales counters. Sales through this channel contributed
                48% of
                our total sales revenue in 2005.





2.
            Sales
                to group or institutional customers. Through this channel, we generated
                31% of our sales revenue in 2005. Because a majority of new consumers
                need
                to learn about our new products before buying them, it becomes very
                important and effective for us to organize or sponsor seminars and
                events
                to present healthcare knowledge while introducing and selling our
                products
                to new users.


-
          11
          -





3.
            Event
                Marketing. Through this channel, we generated 8% of our sales revenue
                in
                2005.





4.
            OTC
                Drug Stores. Especially effective in Shenzhen City, this channel
                allows us
                to put our products on the shelves of OTC drug chain stores through
                a
                strategic alliance arrangement. This channel contributed 8% of our
                overall
                sales in 2005.





5.
            E-commerce.
                Selling through the Internet has become increasingly important to
                our
                sales in undeveloped regions and developed cities. This channel
                contributed 5% of our sales in
                2005.





**THE
      MARKET**





We
      primarily market our products in China. We do not sell any of our products
      in
      the United States or Canada. China’s domestic healthcare product market is
      fast-growing but underdeveloped. On the demand side, the following three forces
      drive market growth:





1)
            The
                rapid growth of China’s economy, which is projected to grow at an annual
                rate of 8% for the next five years. This growing economy will
                significantly increase people’s purchasing
                power.


2)
            The
                increase of the aging population. The China Census Bureau predicts
                that
                the majority of the China “baby boom” population (40% of China’s total
                population) will begin to turn age 65 between 2010 and 2020, which
                represents over 500 million potential consumers of healthcare
                products.


3)
            People
                are increasing desires and expectations for a healthy life in old
                age,
                especially in urban areas.





According
      to a marketing study entitled 2000-2005
      China Healthcare Market Research and Prediction Report ,
      published in February 2004 by CCID Consulting of Hong Kong, China’s healthcare
      product sales volume is projected to exceed RMB 68 billion (US$8.7 billion)
      in
      2009. Moreover, the compound growth rate in the next five years is projected
      to
      be up to 15%; by comparison, this study estimated that the overall healthcare
      product market in the world will be over US$200 billion if measured by sales
      volume.





On
      the
      supply side, the industry can be described as a highly fragmented and
      undercapitalized sector. There are thousands of manufacturers and merchants
      competing in this market, and many new players enter the market every day.
      According to CCID’s study, among those thousands of market participants, only
      1.45% of them have annual sales exceeding RMB 100 million (US$12.8 million);
      around 3% of them have annual sales between RMB 50 and 100 million (between
      US$6.4 million and US$12.8); while 12.5% of them have sales between RMB 100,000
      to RMB 50 million (US$12,800 to US$6.4 million). The rest of them, i.e. 83.05%
      of the companies, have annual sales below RMB 100,000 (US$12,800).





Our
      market in China presents an opportunity to reach over 1 billion consumers,
      but
      there is also very aggressive competition to attract the attention of those
      consumers.





**COMPETITION**





We
      compete with other top-tier healthcare companies in China. Many of them are
      more
      established than we are and have significantly greater financial, technical,
      marketing and other resources than we presently possess. Some of our competitors
      may have greater name recognition and a larger customer base. Those competitors
      may be able to respond more quickly to new or changing opportunities and
      customer requirements and may be able to undertake more extensive promotional
      activities, offer more attractive terms to customers, and adopt more aggressive
      pricing policies. Some of our competitors have also developed similar products
      that compete with ours.


-
          12
          -


According
      to the Summary section on page 1 of the CCID study, the most prominent
      competitors in China’s healthcare market are the Joymain Group in Nanjing and
      the Tianjin Saiyuan Health Products Co., Ltd. in Tianjin. Both of them carry
      FIR
      therapeutic products and have higher sales revenues than we do.





**The
      Joymain Group** ,
      founded
      in 2000, is a well-capitalized publicly listed company with around 3,600
      franchises or exclusive sales stores. In its peak sales year of 2004, it had
      RMB1.4 billion (US$179 million) in sales revenue.





**Tianjin
      Saiyuan** ,
      with a
      smaller market share than The Joymain Group, generated RMB 390 million (US$50
      million) in sales revenue in 2004.





In
      2005,
      sales by both these companies have dropped significantly due to increased market
      competition.





In
      competing with these and other competitors, we believe that we possess the
      following competitive advantages:





1.
            Our
                Proprietary Technique and Materials. In the FIR Therapy Product category,
                our clothing and textile products are made of Apocynum fabric, which
                has
                better FIR features than what our competitors are offering, such
                as cotton
                or synthetic materials. So far, the Company has maintained a strong
                relationship with suppliers of Apocynum
                fiber.





2.
            Our
                distribution network and sales model, which allows us to expand rapidly
                without carrying huge overhead.





3.
            Our
                Capacity for New Product Development. Supported by our own R&D team
                and strategic alliances in China’s science and technology research fields,
                including the Institute of Process Engineering at the Chinese Academy
                of
                Science, the Company has developed a series of innovative products
                in its
                new product pipeline and continues to get them ready to put into
                the
                market.





In
      the
      next two years, we plan to pursue the following measures to maintain our
      competitiveness:





·
            Invest
                more on research & development to foster our capacity for large-scale
                production;


·
            Take
                better control of our source of raw materials by establishing our
                own
                material collection and processing base in Xinjiang Province, the
                heartland for Apocynum production;


·
            Use
                more effectively our Apocynum resources by developing the byproducts
                from
                Apocynum;


·
            Develop
                our distribution network by establishing greater market presence
                in more
                of China’s provinces;


·
            Open
                new offices in Hong Kong, Macao, and Taiwan within the next two
                years;


·
            Explore
                overseas markets by developing sales and distribution agents in other
                countries, such as Japan, Korea, and the USA, where FIR and other
                Chinese
                traditional remedies have show signs of increased popular
                acceptance.





-
          13
          -


**REGULATORY
      ENVIRONMENT**





We
      do not
      sell our products in the United States or Canada and are not subject to US
      food
      and drug laws. Our principal sales market is presently in the People's Republic
      of China. We are subject to China’s Food Sanitation Law, which governs the
      licensing, manufacturing, marketing and distribution of food and nutritional
      supplement products in China. Because Beijing Tenet-Jove is a wholly foreign
      owned enterprise, we are subject to the law on foreign investment enterprises
      in
      China, and the foreign company provisions of the Company Law of China, which
      governs the conduct of our wholly owned subsidiary and its officers and
      directors. Additionally, we are also subject to varying degrees of regulations
      and permit systems by the Chinese government.





The
      governmental approval process in the PRC for a newly developed health product
      such as ours is as follows: a product sample is sent to a clinical testing
      agent
      designated by the Ministry of Health, who conducts extensive clinical testing
      and examination to verify if the product has the specified functions as stated
      by the company producing the product. A report will be issued by the clinical
      testing agent confirming or negating such functions. It generally takes
      approximately six months to one year for the report to be issued. This report
      then has to be submitted to a provincial Health Management Commission for
      approval. A letter of approval issued by such commission will then be submitted
      to the Ministry of Health for the issuance of a certificate that authorizes
      the
      sale and marketing of the product in the PRC. The whole process generally takes
      one and a half to two years. We have followed this process for our products
      currently on the market.





**COMPLIANCE
      WITH ENVIRONMENTAL LAW**





Our
      products are environmentally friendly. They are all made of natural materials.
      We comply with the Environmental Protection Law of China and its local
      regulations. In addition to statutory and regulatory compliance, we have also
      proactively participated in local environmental protection activities,
      especially in Xinjiang and Tianjin, where we have production facilities. Our
      costs of compliance with applicable environmental laws are minimal, because
      the
      processing and manufacturing of Apocynum-based products and bio-ceramic
      additives is conducted in a closed environment without discharge into the
      surrounding environment. The spinning and knitting processes also generate
      very
      limited pollution, if any, to the environment. Penalties would be levied upon
      us
      if we failed to adhere to certain standards. Such failure has not occurred
      in
      the past, and we generally do not anticipate that it may occur in the future,
      but no assurance can be given in this regard.





**ADMINISTRATIVE
      OFFICES**





The
      Company currently maintains offices at Room 3106, BLD B, #39 East 3rd Ring
      Middle Road, Chaoyang District, Beijing, P.R. China, 100022, telephone number
      86
      105869-3011.





The
      Beijing offices are leased at a cost of $15,000 per annum.





**EMPLOYEES**





The
      Company currently has more than158 full-time employees, 57 of them working
      in
      the Company’s headquarters in Beijing, all of our employees are working in the
      following three divisions respectively:





R&D Division:
            25Manufacturing Division:
            63Manufacturing Division:
            70





-
          14
          -


The
      Company plans to hire additional employees as required. Its management and
      employees enjoy both compensation and welfare benefits pursuant to Chinese
      laws.





**ITEM
      2. PROPERTIES**





The
      Company currently maintains offices at Room 3106, Bldg. B, #39 East 3rd Ring
      Middle Road, Chaoyang District, Beijing 100022, P.R. China, Telephone No. 86
      105869-3011. These offices are leased at a cost of $15,000 per annum, pursuant
      to a lease that expires in June 2010.





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 period ended December 31, 2005.





**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 Dec 31, 2005, there were 9,298,823 shares outstanding,
      and
      the Company had 39 shareholders of record.





**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.





-
          15
          -


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 of 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 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 our board
      of
      directors, and our board of directors 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 gain or loss.





-
          16
          -


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 (8.07 RMB to one U.S. Dollar), and average rates of exchange for
      the
      period for revenues, costs, and expenses (8.19RMB 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, 2005 was $53,523.





**DISCUSSION
      OF RESULTS OF OPERATIONS**





Beijing
      Tenet Jove Technological Development Co., Ltd is a healthcare product
      manufacturer and health solution provider in the PRC, principally developing,
      manufacturing, and distributing its proprietary therapeutic products through
      a
      national sales network to its customers in the PRC.





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





·
            **REVENUES**





Our
      revenues for the year ended December 31, 2005 were $2,243,047, representing
      an
      increase of approximately 6.7% from $2,102,219 in fiscal year 2004. We derived
      our revenues primarily from sales of Apocynum-based healthcare products in
      China. Those increases were mainly attributable to our increased marketing
      and
      sales efforts.





·
            **GROSS
                PROFIT MARGIN**





Our
      gross
      margin on sales was $1,141,749, or 50.90% at year-end 2005 as compared to
      $1,273,120, or 60.56% at year-end 2004. Our gross margin decreased by roughly
      10
      percentage points in 2005 as compared to the previous year. The decreased margin
      was mainly due to an increase in the cost of goods sold, including the rising
      price of raw materials—a situation we expect to remedy by building our own
      Apocynum processing plant.





·
            **OPERATING
                EXPENSES**





Our
      total
      operating expenses were $958,785 at year-end 2005, an increase of 15% compared
      with total operating expenses of $832,322 at year-end 2004. The increase was
      mainly caused by increases in bad debt expense, salary expense, and advertising
      expense, offset by a decrease in other selling expense.





·
            **NET
                INCOME**





Our
      consolidated net income was $72,836 for the year ended December 31, 2005 as
      compared to $490,156 for the prior year period. Our net income rate decreased
      by
      roughly 20 percentage points, from 23% in 2004 to 3% in 2005. This decrease
      was
      attributable to an increased cost of goods sold, increased interest expense,
      and
      increased bad debt, advertising and salary expense, offset by reductions in
      our
      other selling expense.


-
          17
          -





·
            **LIQUIDITY
                AND SOURCES OF CAPITAL**





At
      December 31, 2005, our cash and cash equivalents were $273,367, compared to
      $64,272 at year-end 2004. As of December 31, 2005, we had inventories of
      $1,906,756, compared to $2,305,510 at year-end 2004. At December 31, 2005,
      we
      had total current assets of $4,569,340, total current liabilities of $2,244,407
      and working capital of $2,324,933. By contrast, at year-end 2004 we had total
      current assets of $4,094,219, total current liabilities of $2,772,344, and
      working capital of $1,321,875. Thus, our liquidity for fiscal year 2005 was
      significantly improved compared to the previous year.





We
      generally finance our operations from cash flows generated internally, as well
      as customer deposits. In 2005, we also generated increased cash flow from the
      issuance of 2 million shares of our Series A Convertible Preferred Stock. As
      of
      December 31 st ,
      2005,
      we had received proceeds of $998,935. Our shareholders’ equity was $1,716,429 in
      2005, compared to $1,597,070 in 2004—an increase of $119,359.





In
      the
      next 12 months, we anticipate that sufficient funds to maintain the Company’s
      current level of operations will be generated from our operating activities,
      while we would seek funds for expanding our businesses through debt or equity
      financings conducted in compliance with exemptions from registration. We
      anticipate that we need US$950,000 to be used for expanding our scale of
      operations, of which we plan to allocate approximately $200,000 for R&D,
      approximately $250,000 for advertising, approximately $200,000 for wages and
      salaries, and approximately $300,000 for working capital.





·
            **FOREIGN
                CURRENCY AND COMPREHENSIVE
                INCOME**





Our
      consolidated comprehensive income for the year ended December 31, 2005 was
      $126,159, as compared to $490,156 for the year ended December 31, 2004. The
      difference between our 2005 comprehensive income and net income was attributable
      to a foreign currency adjustment. As the exchange rate from US dollars to RMB
      changed during 2005, the foreign currency translation adjustment was US$53,323
      for the year ended December 31, 2005. There was no foreign currency translation
      adjustment for the year ended December 31, 2004.





·
            **OFF-BALANCE
                SHEET ARRANGEMENTS**





For
      the
      years ended December 31, 2005 and December 31, 2004, the Company had no
      off-balance-sheet arrangements.





-
          18
          -


**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, 2005 and 2004, 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, 2005 and 2004, 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 March 29, 2006, as described in note 16, the Company
      discovered material errors in its classification of the purchase of an
      intangible asset and in its provision of bad debts. However, the Company has
      restated the financial statement to reflect the correction of these
      errors.











**Child,
      Van Wagoner & Bradshaw, PLLC**


Salt
      Lake
      City, Utah


March
      29,
      2006, except Note 16, which is dated March 23, 2007





-
          19
          -


**SHINECO,
      INC.**


CONSOLIDATED
      BALANCE SHEETS





**December
                31,****2005**
            
            **2004****Restated****ASSETS****Current
                assets**Cash and cash equivalents
            
            $
            273,367
            
            $
            64,272Trade receivables, net
            
            
            1,906,004
            
            
            1,213,934Other receivables
            
            
            275,138
            
            
            324,426Vendor deposits
            
            
            178,262
            
            
            129,606Prepaid expenses
            
            
            29,813
            
            
            56,471Inventories
            
            
            1,906,756
            
            
            2,305,510**Total
                current assets**
            
            $
            4,569,340
            
            $
            4,094,219Property, plant and equipment, net
            
            
            120,538
            
            
            105,248Related party receivables
            
            
            41,721
            
            
            79,046Investment in unconsolidated subsidiaries
            
            
            78,335
            
            
            --Intangibles, net
            
            
            162,674
            
            
            182,472**Total
                assets**
            
            $
            4,972,608
            
            $
            4,460,985**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current
                liabilities**Trade payables
            
            $
            882,609
            
            $
            1,144,012Related party payables
            
            
            259,788
            
            
            588,201Accrued liabilities
            
            
            41,356
            
            
            11,627Other payables
            
            
            84,167
            
            
            195,567Notes payable
            
            
            675,324
            
            
            314,009Taxes payable
            
            
            41,271
            
            
            87,535Customer deposits
            
            
            202,964
            
            
            409,945Accrued employee benefits
            
            
            49,928
            
            
            21,448Loans from employees
            
            
            7,000
            
            
            --**Total
                current liabilities**
            
            
            2,244,407
            
            
            2,772,344**Series
                A Convertible Preferred stock,**net
                of subscription receivable of $401,065; par value $.001; liquidation
                preference $.70 per share; 5,000,000shares authorized; 2,000,000
                and 0
                shares issued and outstanding
            
            
            998,935
            
            
            --**Minority
                interest**
            
            
            12,837
            
            
            91,571**Stockholders’
                equity**Common stock; par value $.001, 50,000,000 shares authorized;
              9,298,823 shares issued and outstanding
            
            
            9,299
            
            
            9,299Additional paid in capital
            
            
            1,079,908
            
            
            1,079,908Retained earnings
            
            
            573,699
            
            
            507,863Accumulated other comprehensive income
            
            
            53,523
            
            
            --**Total
                stockholders’ equity**
            
            
            1,716,429
            
            
            1,597,070**Total
                liabilities and stockholders’ equity**
            
            $
            4,972,608
            
            $
            4,460,985





See
      Notes
      to Consolidated Financial Statements.


-
          20
          -


**SHINECO,
      INC.**


CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME





**Year
                ended December 31,****2005**
            
            **2004**(Restated)
            
            (Restated)RevenuesSales revenues
            
            $
            2,243,047
            
            $
            2,102,219Cost of goods sold
            
            
            1,101,298
            
            
            829,099Gross
                profit
            
            
            1,141,749
            
            
            1,273,120Operating
                expensesAdvertising
            
            
            34,797
            
            
            3,490Bad debt expense
            
            
            250,171
            
            
            165,766Other selling expenses
            
            
            21,626
            
            
            88,252Salaries and benefits
            
            
            360,232
            
            
            284,664Depreciation and amortization
            
            
            30,311
            
            
            27,104Other general and administrative expenses
            
            
            261,648
            
            
            263,046Total
                operating expenses
            
            
            958,785
            
            
            832,322Net operating income
            
            
            182,964
            
            
            440,798Other income (expense)
            
            
            (102,108
            )
            
            (29,013
            )Interest expense
            
            
            (21,155
            )
            
            --Income (loss) on equity investments
            
            
            10,590
            
            
            408Total
                other income (expense)
            
            
            (112,673
            )
            
            (28,605
            )Income before taxes and minority interest
            
            
            70,291
            
            
            412,193Provision for income taxes
            
            
            1,332
            
            
            1,617Income
                before minority interest
            
            
            68,959
            
            
            410,576Minority interest in (income)/loss of subsidiaries
            
            
            4,237
            
            
            (1,840
            )Income
                from continuing operations
            
            
            73,196
            
            
            408,736Income (Loss) from operations of disposed subsidiaries
            
            
            (215
            )
            
            475Gain (Loss) on disposal of subsidiaries
            
            
            (145
            )
            
            80,945Net
                income (loss) from discontinued operations
            
            
            (360
            )
            
            81,420Net income
            
            $
            72,836
            
            $
            490,156Foreign currency translation adjustment
            
            
            53,323
            
            
            --Comprehensive income
            
            $
            126,159
            
            $
            490,156Basic
                earnings per common share:From continuing operations
            
            $
            0.01
            
            $
            0.04From discontinued operations
            
            $
            (0.00
            )
            $
            0.01From net income
            
            $
            0.01
            
            $
            0.05Diluted
                earnings per common share:From continuing operations
            
            $
            0.01
            
            $
            0.04From discontinued operations
            
            $
            (0.00
            )
            $
            0.01From net income
            
            $
            0.01
            
            $
            0.05Denominator for basic earnings per share
            
            
            9,298,823
            
            
            9,298,823Denominator for diluted earnings per share
            
            
            9,298,823
            
            
            9,300,160





See
      Notes
      to Consolidated Financial Statements.


-
          21
          -


**SHINECO,
      INC.**


CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY


(Restated)








**Preferred
                Stock**
            
            **Common
                Stock**
            
            **Additional
                Paid In**
            
            **Retained**
            
            **Other
                Comprehensive****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Earnings**
            
            **Income
                (Loss)**
            
            **Total**Balance,
                January 1, 2004
            
            
            --
            
            $
            --
            
            
            1,373,823
            
            $
            1,374
            
            $
            59,012
            
            $
            17,707
            
            $
            --
            
            $
            78,093--Increase in registered capital
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,026,571
            
            
            --
            
            
            --
            
            
            1,026,571Stock issued for services prior to recapitalization
              October 29
            
            
            
            
            
            
            
            
            1,125,000
            
            
            1,125
            
            
            1,125
            
            
            --
            
            
            --
            
            
            2,250Shares
                issued in merger
              December 30
            
            
            
            
            
            
            
            
            6,800,000
            
            
            6,800
            
            
            (6,800
            )
            
            --
            
            
            --
            
            
            --Net income for the year
            
            
            
            
            
            
            
            
            --
            
            
            --
            
            
            --
            
            
            491,996
            
            
            --
            
            
            491,996Net income - minority interest
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (1,840
            )
            
            --
            
            
            (1,840
            )Balance
                December 31, 2004
            
            
            
            
            
            
            
            
            9,298,823
            
            
            9,299
            
            
            1,079,908
            
            
            507,863
            
            
            --
            
            
            1,597,070Net income for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            72,836
            
            
            
            
            
            72,836Accrued preferred dividends
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (7,000
            )
            
            
            
            
            (7,000
            )Currency translation adjustment
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            53,323
            
            
            53,323Balance
                December 31, 2005
            
            
            --
            
            $
            --
            
            $
            9,298,823
            
            $
            9,299
            
            $
            1,079,908
            
            $
            573,699
            
            $
            53,323
            
            $
            1,716,429







See
      Notes
      to Consolidated Financial Statements.


-
            22
            -




**SHINECO,
      INC.**


CONSOLIDATED
      STATEMENTS OF CASH FLOWS





**Year
                ended December 31,****2005**
            
            **2004**(Restated)**Cash
                flows from operating activities:**Net income
            
            $
            72,836
            
            $
            490,156Adjustments
                to reconcile net loss to net cash used in operations:Depreciation and amortization
            
            
            30,312
            
            
            27,137Provision for allowance on receivables
            
            
            250,171
            
            
            165,766Inventory reserves
            
            
            --
            
            
            111,092Stock issued for services
            
            
            --
            
            
            2,250Loss from unconsolidated subsidiaries
            
            
            21,155
            
            
            --Minority interest
            
            
            (4,237
            )
            
            1,840Loss (Gain) on disposal of subsidiary
            
            
            145
            
            
            (80,945
            )**Changes
                in operating assets and liabilities:**Trade receivables
            
            
            (621,441
            )
            
            (1,333,002
            )Other receivables
            
            
            (454,613
            )
            
            (380,590
            )Vendor deposits
            
            
            (48,656
            )
            
            (129,606
            )Prepaid expenses
            
            
            (3,387
            )
            
            (56,471
            )Inventories
            
            
            256,727
            
            
            (782,177
            )Trade payables
            
            
            (141,081
            )
            
            904,428Accrued liabilities
            
            
            29,784
            
            
            (148,231
            )Other payables
            
            
            (32,338
            )
            
            195,567Taxes payable
            
            
            (44,657
            )
            
            87,535Customer deposits
            
            
            (206,981
            )
            
            409,944Accrued employee benefits
            
            
            28,480
            
            
            21,448**Net
                cash used in operations**
            
            
            (867,781
            )
            
            (493,859
            )**Cash
                flows from investing activities:**Investment in unconsolidated subsidiaries
            
            
            (99,490
            )
            
            --Related party receivables
            
            
            37,325
            
            
            (79,046
            )Proceeds from sale of subsidiary
            
            
            73,863
            
            
            172,283Purchase of intangible asset
            
            
            (2,808
            )
            
            --Purchase of property and equipment
            
            
            (23,144
            )
            
            (121,948
            )**Net
                cash used in investing activities**
            
            
            (14,254
            )
            
            (28,711
            )**Cash
                flows from financing activities:**Related party payables
            
            
            (328,413
            )
            
            332,339Repayments on short-term notes payable
            
            
            --
            
            
            (63,960
            )Proceeds from short term loans
            
            
            361,315
            
            
            314,009Proceeds from sale of preferred stock
            
            
            998,935
            
            
            --**Net
                cash provided by financing activities**
            
            
            1,031,837
            
            
            582,388Effect
                of rate changes on cash
            
            
            59,293
            
            
            --Increase in cash and cash equivalents
            
            
            209,095
            
            
            59,818Cash and cash equivalents, beginning of period
            
            
            64,272
            
            
            4,454Cash and cash equivalents, end of period
            
            $
            273,367
            
            $
            64,272**Supplemental
                disclosures of cash flow information:**Cash paid for interest
            
            $
            102,108
            
            $
            20,458Cash paid for income taxes
            
            $
            1,617
            
            $
            --**Supplemental
                disclosures of non-cash investing and financing
                activities:**Stock issued for services
            
            $
            --
            
            $
            2,250Inventory and intangibles acquired in business combination
            
            $
            --
            
            $
            1,026,571Accrual
                of preferred stock dividend
            
            $
            7,000
            
            $
            --





See
      notes
      to consolidated financial statements.


-
            23
            -
  **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. (“Beijing Tenet
      Jove”) in exchange for stock of the Company.  The
      stock
      exchange agreement is subject to the approval of the Chinese government, and
      the
      approval has not yet been received from the PRC government and until such
      approval is received the ownership of Beijing Tenet Jove by Shineco is legally
      unenforceable in the PRC, but the Company is confident that such approval will
      be received. The consolidated results of operations are primarily those of
      Beijing Tenet Jove and its consolidated subsidiaries.





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).





The
      Company primarily manufactures and sells (1) Far Infrared Therapeutic Clothing
      and Textile Products, (2) Apocynum-based Nutritional Supplements, and (3.)
      FIR
      Multi-functional Therapeutic Devices, which are innovative therapeutic products
      for complementary treatment of both acute and chronic health concerns. By
      incorporating traditional Chinese medical methodology with modern
      bio-technology, we have developed and commercialized over 100 products under
      our
      brand name of “ 天益 Tenethealth®”,
      which means “Benefit from Nature.”





**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. 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, 2005 and 2004 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
            
            100%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%





-
          24
          -


**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 $86,226 and $165,766 at December 31, 2005 and 2004,
      respectively.





OTHER
      RECEIVABLES





Other
      receivables consist primarily of advances made to third parties. The balances
      due to the Company were $275,138 and $324,426 net of bad debt allowance of
      $208,651 and $0 at December 31, 2005 and 2004, 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:





**December
                31, 2005**
            
            **December
                31, 2004**Raw
                materials
            
            
            628,095
            
            
            456,914Packaging
                materials
            
            
            --
            
            
            105,829Sub-contracting
                materials
            
            
            --
            
            
            293,658Production
                costs
            
            
            --
            
            
            10,641Work
                in progress
            
            
            69,449
            
            
            --Finished
                products
            
            
            1,323,192
            
            
            1,549,560Obsolescence
                reserve
            
            
            (113,980
            )
            
            (111,092
            )Totals
            
            
            1,906,756
            
            
            2,305,510






-
          25
          -




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
                  yearsVehicles
              7
                  yearsOffice
                  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) a
      customer issues purchase orders or otherwise agrees to purchase products; (2)
      products are delivered to the customer; (3) pricing is fixed or determined
      in
      accordance with the purchase order or agreement; and (4) collectibility is
      reasonably assured. The Company sells its products primarily at the wholesale
      level and does not allow returns of its products. Consequently, no reserve
      for
      future returns has been established.





The
      Company has agreements with distributors for the territorial marketing of its
      products. No fees are paid to the Company by the distributors for such
      agreements.





ADVERTISING
      EXPENSE





Advertising
      costs are expensed as incurred. Advertising expense amounted to $34,797, and
      $3,490 for the years ended December 31, 2005 and 2004, respectively.





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.


-
          26
          -


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 only minimal 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, warrants and conversion features attached to preferred
      stock or debt.





The
      Company issued convertible preferred stock on December 1, 2005, but no exercise
      can be made until after one year from issue, and then only if there is a public
      market for the common stock of the Company. At December 31, 2005 there were
      no
      exercisable conversion rights attached to the preferred stock.





The
      numerator and denominator used in the basic and diluted EPS of common stock
      computations are presented in the following table:





**Year
                ended December 31,****2005**
            
            **2004**NUMERATOR
                FOR BASIC AND DILUTED EPSIncome from continuing operations
            
            
            73,196
            
            
            408.736Accrued dividend on Series A Preferred stock
            
            
            (7,000
            )
            
            --Income
                from continuing operations available to common
                shareholders
            
            
            66,196
            
            
            408,736Income (loss) from discontinued operations
            
            
            (360
            )
            
            81,420Net
                income to common stockholders
            
            $
            65,836
            
            $
            490,156DENOMINATOR
                FOR BASIC EPSWeighted average shares of common stock outstanding
            
            
            9,298,823
            
            
            9,298,823EPS - Basic from continuing operations
            
            $
            0.01
            
            $
            0.04EPS - Basic from discontinued operations
            
            $
            (0.00
            )
            $
            0.01EPS - Basic
            
            $
            0.01
            
            $
            0.05DENOMINATOR
                FOR FULLY DILUTED EPSWeighted average shares of common stock outstanding
            
            
            9,298,823
            
            
            9,298,823Exercisable warrants
            
            
            --
            
            
            1,337Series A Preferred stock conversion rights
            
            
            --
            
            
            --Weighted
                average common shares and warrants outstanding
            
            
            9,298,823
            
            
            9,300,160EPS - Fully diluted from continuing operations
            
            $
            0.01
            
            $
            0.04EPS - Fully diluted from discontinued operations
            
            $
            (0.00
            )
            $
            0.01EPS - Fully diluted
            
            $
            0.01
            
            $
            0.05




-
          27
          -




**4.**  **BUSINESS
      COMBINATIONS**





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.





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
            
            $
            27,559Accounts receivable
            
            
            5,398Inventory
            
            
            467,065Other receivables
            
            
            123,672Vendor deposits
            
            
            205,263Fixed assets
            
            
            43,197Payables
            
            
            (707,821
            )Accrued liabilities
            
            
            (12,050
            )Net
                assets of subsidiary
            
            
            152,283Minority interest @ 10%
            
            
            (15,228
            )Net
                assets acquired
            
            $
            137,055





On
      July
      27, 2004, Beijing Tenet Jove sold all of its equity interest in Haer Bin, and
      on
      October 18, 2004 Beijing Tenet Jove sold all of its equity interest in Tian
      Bai.
      In aggregate, the Company recognized gains of $80,945 on the sales of these
      subsidiaries.


-
          28
          -


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 shares 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.





On
      November 10, 2005 Beijing Tenet Jove sold all of its equity interest in Nan
      Jing, and on November 12, 2005 Beijing Tenet Jove sold all of its equity
      interest in QiQiHaer. In aggregate, the Company recognized losses of $145 on
      the
      sales of these subsidiaries.





**5.**  **COMMON
      AND PREFERRED STOCK TRANSACTIONS**





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 valued at par, for an aggregate 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.





On
      December 1, 2005 the Company issued 2,000,000 shares of Series A Convertible
      Preferred Stock (“Preferred”) at $.70 per share for an aggregate amount of
      $1,400,000 less subscriptions receivable of $401,065. The Preferred stock has
      a
      par value of $0.001 and a stated value and liquidation preference of $0.70
      per
      share. The Preferred stock bears cumulative dividends at 6% per annum, is
      redeemable for cash for $0.70 per share plus unpaid dividends at the Company’s
      option and has a mandatory redemption clause for those same amounts in the
      case
      of a change in control. The stock is convertible, after one year from the date
      of issue, for common stock at 88% of the market price of the common stock on
      the
      date of conversion. For every four common shares received upon conversion the
      converting shareholder is also to receive a warrant to purchase one additional
      share of common stock at an exercise price of $2.00 per share. The Preferred
      stockholders are protected from dilution and have voting rights equal to the
      common shares they would hold as if converted at the time of any vote. The
      cumulative dividend and redemption features make the Preferred stock more akin
      to debt than to equity. Accordingly, the redemption value is presented as a
      liability on the balance sheet. The conversion feature is not detachable and
      has
      therefore not been provided with a value separate from the Preferred
      stock.





**6.**  **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, 2005 and 2004
      are
      $41,721 and $79,046, respectively.





Related
      party payables consist of loans from its stockholders. The loans bear no
      interest and are payable on demand. Balances at December 31, 2005 and 2004
      are
      $259,788 and $588,201, respectively.





-
          29
          -


**7.**  **PROPERTY,
      PLANT & EQUIPMENT**





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





**2005**
            
            **2004**Machinery
                and equipment
            
            $
            27,270
            
            $
            24,719Vehicles
            
            
            52,455
            
            
            40,302Office
                equipment
            
            
            74,010
            
            
            65,762Subtotal
            
            
            153,735
            
            
            130,783Less:
                accumulated depreciation
            
            
            (33,197
            )
            
            (25,535
            )Net
                property and equipment
            
            $
            120,538
            
            $
            105,248





Depreciation
      expense was $6,880 and $20,671 for years ending December 31, 2005 and 2004,
      respectively.





**8.**  **INVESTMENTS**





During
      2005, the Company acquired equity interests in eight of its distributors by
      contributing inventory to such distributors. The Company accounts for these
      investments using the equity method if the ownership percentage exceeds 20%
      or
      if the ownership percentage is less than 20% and significant control is
      evidenced by significant intercompany sales transactions. Investments where
      the
      ownership percentage is less than 20% and significant control is not evident
      are
      accounted for at cost. The following table reflects certain information about
      the Company’s investments in unconsolidated subsidiaries.





**Name**
            
            **Date
                Acquired**
            
            **Ownership**
            
            **Initial
                Investment**
            
            **Share
                of Income/Loss**
            
            **12/31/05
                Investment**Jinan
            
            11/25/2005
            
            25.00%
            
            $48,825
            
            $(9,992)
            
            $38,833Changchun
            
            10/26/2005
            
            25.00%
            
            13,567
            
            5,312
            
            18,879Yantai
            
            10/26/2005
            
            25.00%
            
            22,091
            
            (12,222)
            
            9,869Liaoyang
            
            12/31/2005
            
            25.00%
            
            4,707
            
            --
            
            4,707Xuzhou
            
            7/26/2005
            
            15.00%
            
            3,609
            
            (316)
            
            3,293Huaian
            
            7/26/2005
            
            15.00%
            
            3,937
            
            (3,937)
            
            --Shenyang
            
            9/26/2005
            
            15.00%
            
            263
            
            N/A
            
            263Shenzhen
            
            12/31/2005
            
            15.00%
            
            2,491
            
            N/A
            
            2,491Totals
            
            
            
            
            
            $99,490
            
            $(21,155)
            
            $78,335





**9.**  **INTANGIBLES**





Intangibles
      consist primarily of manufacturing patent rights, acquired in the business
      combination with Tianjin as well as a 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, 2005 and 2004 is $29,665
      and $6,466, respectively. Amortization expense recognized during 2005 and 2004
      is $23,199 and $6,466, respectively.


-
            30
            -




**10.**  **NOTES
      PAYABLE**





Notes
      payable bear interest between 6.5% and 18% and have maturities between three
      to
      twelve months from issue. At December 31, 2005 and 2004, principal balances
      of
      notes payable due within a year totaled $675,324 and $314,009, respectively.
      Accrued interest of $13,447 and $8,555 relating to theses notes was included
      in
      other payables at December 31, 2005 and 2004.





**11.**  **CUSTOMER
      DEPOSITS**





Customer
      deposits at December 31, 2005 consist of $202,964 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.





**12.**  **CONCENTRATIONS**





Several
      of the Company’s distributors each accounted for greater than 5% of total sales
      in the year ended December 31, 2005. The loss of one or more of these
      distributors could have a significant adverse affect on the future operating
      results of the Company. The following table contains certain information with
      respect to these distributors.





**2005
                Sales**
            
            **Percentage**Changchun
            
            $
            289,802
            
            
            12.92
            %Jinan
            
            
            236,347
            
            
            10.54Nan
                Jing
            
            
            141,360
            
            
            6.30QiQiHaer
            
            
            151,309
            
            
            6.75Wulumuqi
            
            
            454,062
            
            
            20.24Xuzhou
            
            
            317,538
            
            
            14.16Totals
            
            $
            1,590,418
            
            
            70.91
            %





**13.**  **COMMITMENTS**





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





2006
            
            $
            44,5212007
            
            
            59,3622008
            
            
            44,5212009
            
            
            --2010
            
            
            --Totals
            
            $
            148,404





**14.**  **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.


-
            31
            -




The
      Company has not yet received approval from the PRC government regarding the
      stock exchange agreement whereby the Company acquired Beijing Tenet Jove, and
      until such approval is received the ownership of Beijing Tenet Jove by Shineco
      is legally unenforceable in the PRC. It is expected to receive the approval
      at
      the beginning of May 2006. The process to obtain such approval consists
      of:  a)
      filing
      with the PRC Ministry of Commerce to get approval and certification of the
      foreign investment company; b) filing with the State Development and Reformation
      Committee which is responsible for foreign investment projects; and c) filing
      with the State Administration of Foreign Exchange to get the foreign exchange
      registration certificate. The Company has filed the required documents and
      is
      currently waiting for the approvals.





**15.**  **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 was issued to the selling stockholders, exercisable at par value,
      and expiring on December 12, 2005. None of these warrants was outstanding at
      December 31, 2005.





**16.**  **NEW
      ACCOUNTING PRONOUNCEMENTS**





In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      155, “Accounting for Certain Hybrid Financial Instruments - an amendment of FASB
      Statements No. 133 and 140”. The statement permits fair value remeasurement for
      any hybrid financial instrument that contains an embedded derivative that
      otherwise would require bifurcation, clarifies which interest-only strips are
      not subject to the requirements of Statement 133, establishes a requirement
      to
      evaluate interests in securitized financial assets to identify interests that
      are freestanding derivatives or that are hybrid financial instruments that
      contain an embedded derivative requiring bifurcation, clarifies that
      concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends Statement 140 to eliminate the prohibition on a
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. The Statement is effective for financial instruments acquired or
      issued after the beginning of the first fiscal year that begins after September
      15, 2006. The Company is currently evaluating whether the Statement will have
      any impact on its financial statements.





In
      February 2006, the FASB issued Staff Position No. FAS 123(R)-4, “Classification
      of Options and Similar Instruments Issued as Employee Compensation That Allow
      for Cash Settlement upon the Occurrence of a Contingent Event”. This position
      address the classification of options and similar instruments issued as employee
      compensation that allow for cash settlement upon the occurrence of a contingent
      event, amending paragraphs 32 and A229 of SFAS No. 123 (revised 2004),
“Share-Based Payment”. As the Company has not traditionally paid employee
      compensation through the issuance of equity securities, no impact is expected
      on
      its financial statements.





In
      October 2005, the FASB issued Staff Position No. FAS 13-1, “Accounting for
      Rental Costs Incurred during a Construction Period”. This position addresses the
      accounting for rental costs associated with operating leases that are incurred
      during a construction period. Management believes that this position has no
      application to the Company.





-
          32
          -


In
      May
      2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections
      (“SFAS No. 154”), which replaced Accounting Principles Board Opinion No. 20,
      Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim
      Financial Statements. SFAS No. 154 changes the requirements for the accounting
      for and reporting of a change in accounting principles. It requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principles, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change. This statement
      is effective for accounting changes and corrections of errors made in fiscal
      years beginning after December 15, 2005. The impact on the Company’s operations
      will depend on future accounting pronouncements or changes in accounting
      principles.





In
      March
      2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for
      Conditional Asset Retirement Obligations.” FIN 47 clarifies that the term
“Conditional Asset Retirement Obligation” as used in FASB Statement No. 143,
“Accounting for Asset Retirement Obligation,” refers to a legal obligation to
      perform an asset retirement activity in which the timing and/or method of
      settlement are conditional on a future event that may or may not be within
      the
      control of the entity. Accordingly, an entity is required to recognize a
      liability for the fair value of a Conditional Asset Retirement Obligation if
      the
      fair value of the liability can be reasonably estimated. FIN 47 is effective
      no
      later than the end of the fiscal year ending after December 15, 2005. Management
      does not believe the adoption of FIN 47 will have a material affect on the
      Company’s financial position, results of operations or cash flows.





**17.**  **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.





Also
      subsequent to the issuance of the financial statements, management reevaluated
      its calculations of the provision for bad debts. The company found that
      uncollectible receivables had not been adequately provided for, so it increased
      the provision for bad debts accordingly.





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


-
          33
          -




**Year
                ended December 31,****Restated**
            
            **Original****2005**
            
            **2005****ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            273,367
            
            $
            273,367Trade
                receivables, net
            
            
            1,906,004
            
            
            1,906,004Other
                receivables
            
            
            275,138
            
            
            651,060Vendor
                deposits
            
            
            178,262
            
            
            178,262Prepaid
                expenses
            
            
            29,813
            
            
            29,813Inventories
            
            
            1,906,756
            
            
            1,906,756Total
                current assets
            
            
            4,569,340
            
            
            4,945,262Property,
                plant and equipment, net
            
            
            120,538
            
            
            120,538Related
                party receivables
            
            
            41,721
            
            
            41,721Investment
                in unconsolidated subsidiaries
            
            
            78,335
            
            
            78,335Intangibles,
                net
            
            
            162,674
            
            
            22,144Total
                assets
            
            $
            4,972,608
            
            $
            5,208,000**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilitiesTrade
                payables
            
            $
            882,609
            
            $
            882,609Related
                party payables
            
            
            259,788
            
            
            259,788Accrued
                liabilities
            
            
            41,356
            
            
            41,356Other
                payables
            
            
            84,167
            
            
            84,167Notes
                payable
            
            
            675,324
            
            
            675,324Taxes
                payable
            
            
            41,271
            
            
            41,271Customer
                deposits
            
            
            202,964
            
            
            202,964Accrued
                employee benefits
            
            
            49,928
            
            
            49,928Accrued
                dividends on preferred stock
            
            
            7,000
            
            
            7,000Total
                current liabilities
            
            
            2,244,407
            
            
            2,244,407Series
                A Convertible preferred stock, net of subscription receivable of
                $401,065;
              par value $.001; liquidation preference $.70 per share; 5,000,000
                shares
                authorized;
              2,000,000 and 0 shares issued and outstanding
            
            
            998,935
            
            
            998,935Minority
                interest
            
            
            12,837
            
            
            12,837Stockholders'
                equityCommon
                stock: par value $.001; 50,000,000 shares authorized;
              9,298,823 shares issued and outstanding
            
            
            9,299
            
            
            9,299Additional
                paid in capital
            
            
            1,079,908
            
            
            1,079,908Retained
                earnings
            
            
            573,699
            
            
            811,560Accumulated
                other comprehensive income
            
            
            53,523
            
            
            51,054Total
                stockholders' equity
            
            
            1,716,429
            
            
            1,951,821Total
                liabilities and stockholders' equity
            
            $
            4,972,608
            
            $
            5,208,000





-
          34
          -




**Year
                ended December 31,****Restated**
            
            **Original****2005**
            
            **2005**RevenuesSales
                revenues
            
            $
            2,243,047
            
            $
            2,243,047Cost
                of goods sold
            
            
            1,101,298
            
            
            1,101,298Gross
                profit
            
            
            1,141,749
            
            
            1,141,749Operating
                expensesAdvertising
            
            
            34,797
            
            
            34,797Bad
                debt expense
            
            
            250,171
            
            
            39,283Other
                selling expenses
            
            
            21,626
            
            
            21,626Salaries
                and benefits
            
            
            360,232
            
            
            360,232Depreciation
                and amortization
            
            
            30,311
            
            
            8,428Other
                general and administrative expenses
            
            
            261,648
            
            
            261,648Total
                operating expenses
            
            
            958,785
            
            
            726,014Operating
                income
            
            
            182,964
            
            
            415,735Other
                income (expense)Interest
                expense
            
            
            (102,108
            )
            
            (102,108
            )Income
                (loss) on equity investments
            
            
            (21,155
            )
            
            (21,155
            )Other
            
            
            10,590
            
            
            10,590Total
                other income (expense)
            
            
            (112,673
            )
            
            (112,673
            )Income
                before taxes and minority interest
            
            
            70,291
            
            
            303,062Provision
                for income taxes
            
            
            1,332
            
            
            1,332Income
                before minority interest
            
            
            68,959
            
            
            301,730Minority
                interest in (income)/loss of subsidiaries
            
            
            4,237
            
            
            4,237Income
                from continuing operations
            
            
            73,196
            
            
            305,967Income
                (loss) from operations of disposed subsidiaries
            
            
            (215
            )
            
            (215
            )Loss
                (gain) on disposal of subsidiaries
            
            
            (145
            )
            
            (145
            )Net
                income (loss) from discontinued operations
            
            
            (360
            )
            
            (360
            )Net
                income
            
            $
            72,836
            
            $
            305,607Foreign
                currency translation adjustment
            
            
            53,323
            
            
            51,054Comprehensive
                income
            
            $
            126,159
            
            $
            356,661Basic
                earnings (loss) per common share:From
                continuing operations
            
            $
            0.01
            
            $
            0.03From
                discontinued operations
            
            $
            (0.00
            )
            $
            (0.00
            )From
                net income
            
            $
            0.01
            
            $
            0.03Diluted
                earnings (loss) per common share:From
                continuing operations
            
            $
            0.01
            
            $
            0.03From
                discontinued operations
            
            $
            (0.00
            )
            $
            (0.00
            )From
                net income
            
            $
            0.01
            
            $
            0.03Denominator
                for basic earnings per share
            
            
            9,298,823
            
            
            9,298,823Denominator
                for diluted earnings per share
            
            
            9,298,823
            
            
            9,298,823


-
          35
          -




**Year
                ended December 31,****Restated**
            
            **Original****2005**
            
            **2005****Cash
                flows from operating activities:**Net
                income
            
            $
            72,836
            
            $
            305,607**Adjustments
                to reconcile net income to net cash used in
                operations:**Depreciation
                and amortization
            
            
            30,312
            
            
            8,429Provision
                for allowance on receivables
            
            
            250,171
            
            
            39,283Loss
                from unconsolidated subsidiaries
            
            
            21,155
            
            
            21,155Minority
                interest
            
            
            (4,237
            )
            
            (4,237
            )Loss
                (gain) on disposal of subsidiary
            
            
            145
            
            
            145**Changes
                in operating assets and liabilities:**Trade
                receivables
            
            
            (621,441
            )
            
            (621,441
            )Other
                receivables
            
            
            (454,613
            )
            
            (454,613
            )Vendor
                deposits
            
            
            (48,656
            )
            
            (48,656
            )Prepaid
                expenses
            
            
            (3,387
            )
            
            (3,387
            )Inventories
            
            
            256,727
            
            
            256,727Trade
                payables
            
            
            (141,081
            )
            
            (141,081
            )Accrued
                liabilities
            
            
            29,784
            
            
            29,784Other
                payables
            
            
            (32,338
            )
            
            (32,338
            )Taxes
                payable
            
            
            (44,657
            )
            
            (44,657
            )Customer
                deposits
            
            
            (206,981
            )
            
            (206,981
            )Accrued
                employee benefits
            
            
            28,480
            
            
            28,480**Net
                cash used in operations**
            
            
            (867,781
            )
            
            (867,781
            )**Cash
                flows from investing activities:**Investment
                in unconsolidated subsidiaries
            
            
            (99,490
            )
            
            (99,490
            )Related
                party receivables
            
            
            37,325
            
            
            37,325Proceeds
                from sale of subsidiary
            
            
            73,863
            
            
            73,863Purchase
                of intangible assets
            
            
            (2,808
            )
            
            (2,808
            )Purchase
                of property and equipment
            
            
            (23,144
            )
            
            (23,144
            )**Net
                cash used in investing activities**
            
            
            (14,254
            )
            
            (14,254
            )**Cash
                flows from financing activities:**Related
                party payables
            
            
            (328,413
            )
            
            (328,413
            )Proceeds
                from short term loans
            
            
            361,315
            
            
            361,315Proceeds
                from sale of preferred stock
            
            
            998,935
            
            
            998,935**Net
                cash provided by financing activities**
            
            
            1,031,837
            
            
            1,031,837Effect
                of rate changes on cash
            
            
            59,293
            
            
            59,293Increase
                in cash and cash equivalents
            
            
            209,095
            
            
            209,095Cash
                and cash equivalents, beginning of period
            
            
            64,272
            
            
            64,272Cash
                and cash equivalents, end of period
            
            $
            273,367
            
            $
            273,367


-
            36
            -




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





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





**ITEM
      8A. CONTROLS AND PROCEDURES**





*Evaluation
      of Controls* .
      As of
      December 31, 2005, 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, 2005, 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,
      2005, 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.





**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
            
            55
            
            Chairman
                & CEODan
                Liu
            
            33
            
            Director
                & CFOWeixing
                Yin
            
            48
            
            DirectorShuanpeng
                Tian
            
            55
            
            DirectorXiaoguang
                Zhang
            
            56
            
            DirectorLin
                Wen
            
            27
            
            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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            38
            -
  **Yuying
      Zhang:** Chairman
      and CEO of Shineco, Inc. **;** Chairman
      and CEO of Beijing Tenet-Jove Technological Development Co., Ltd.





Mr.
      Zhang
      has been the Chairman and CEO of Shineco since 2004; he also served as chairman
      and CEO of Tenet-Jove since 2003. From 1995 until 2003, he worked as a general
      manager of Tianjin Balas Technological Development Co., Ltd. Prior to that,
      he
      worked as the vice-superintendent of Xi’an Herbal Medicine Multi-Subject
      Academy. Mr. Zhang received a Bachelor Degree in Chinese Language and Literature
      from the China Central Radio and Television University. He also holds the title
      of senior economist.





Mr.
      Zhang
      has 20 years of experience operating high tech enterprises; he has successfully
      organized and led several large-scale medical technology corporations. His
      experience extends to comprehensive management of R&D and production,
      promotion and marketing of medicines and health care products.





**Liu
      Dan:** Director
      & CFO of Shineco, Inc.; CFO of Beijing Tenet-Jove Technological Development
      Co., Ltd.





Ms.
      Liu,
      age 33, has been a director and CFO of Shineco and Tenet-Jove since 2005. Also,
      Ms Liu has been the Chief Financial Officer of Beijing Tenet-Jove Technological
      Development Co., Ltd. since December 2005. Her duties are to direct and oversee
      all financial activities of the company, including preparation of current
      financial reports, financial summaries, and forecasts for future business
      growth, as well as providing accurate and complete financial information for
      decision making. She is also in charge of financial work related to fund-raising
      and obtaining listing or quotation of the Company’s securities in the US
      securities markets. Ms. Liu has 12 years of experience in economics and
      financial affairs.





Prior
      to
      joining Shineco, Ms. Liu was CFO of Shenzhen Aerospace Information Co., Ltd.,
      from August 2004 to December 2005. From September 2002 to July 2004, she was
      a
      full time student at China Renmin University studying for her Master’s degree in
      Financial Management. Prior to this, Ms. Liu served as Vice President at YantaLu
      Sub-Branch, Shaanxi Branch, Bank of China from May 2002 to September 2002.
      Ms.
      Liu also received her Bachelor’s degree in Economics from Shanghai Financial and
      Economic University. She is a Chinese Certified Public Accountant, Chinese
      Evaluator of Registered Capital, and holds the title of economist.





**Weixing
      Yin:** Director
      of Shineco, Inc.; Vice Chairman of Beijing Tenet-Jove Technological Development
      Co., Ltd.





Mr.
      Yin
      has been the Vice-President and Director of Shineco since 2004; he has also
      served as deputy chairman of Tenet-Jove from 2003 to present. As a principal
      investor in Tenet-Jove, Mr. Yin has devoted himself to corporate long-term
      strategy and development layout. He is in charge of business expansion and
      corporate public relations. Prior to joining Shineco and Tenet-Jove he was
      the
      general manager of Beijing Superstar Culture and Communication Company
      continuously since 1994.





Mr.
      Yin
      graduated from the Beijing University of Art with a Bachelor Degree in Chinese
      Literature. He is a professional writer adept at media event planning and media
      public relations. Mr. Yin has successfully organized many large TV shows and
      programs in China, such as the first “China 3.15 Consumers Day Shows,” “China
      21st Century Senior Round Table Conference,” and the “Great Yaluzangbu Canyon
      Scientific Excursion.”





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          39
          -


**Shuangpeng
      Tian:** Director
      of Shineco, Inc.; Director of Beijing Tenet-Jove Technological Development
      Co.,
      Ltd.





Mr.
      Shuangpeng Tian, age 55, has been the Vice Board Chairman 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. Concurrent with his positions with
      Shineco, Inc. and Beijing Tenet-Jove Technological Development Co., Ltd., Mr.
      Tian has also served as Vice Chairman of Tianjin Kinghealth Technological
      Development Co., Ltd. since December 2003. From August 1994 to April 2006,
      he
      served as General Manager of Renqiu Electric Power Company Hebei Province.
      Mr.
      Tian received his Bachelor’s degree in Electronic Engineering from Xi'an
      JiaoTong University.





**Xiaoguang
      Zhang:** Director
      of Shineco, Inc.





Concurrent
      with his position at Shineco, Mr. Xiaoguang Zhang, age 56, has also served
      as
      President of Beijing ZhongMeiRongGuang Investment Consulting Co., Ltd. from
      November 2003 to present. From August 2000 to November 2003, Mr. Zhang was
      Vice
      President of Dongfang Haoyu Investment Group in charge of investment services.
      From April 1992 to August 2000, Mr. Zhang served as the Supervising Department
      Director of the Industrial and Commercial Bank of China.





Mr.
      Zhang
      has over 20 years of experience in dealing with securities and financing
      transactions. His responsibilities at Shineco are establishing current and
      long-range goals, objectives, plans and policies, overseeing the adequacy and
      soundness of the organization’s financial structure, and managing day-to-day
      business development of the Company.





**Lin
      Wen:** Corporate Secretary of Shineco, Inc.





Ms.
      Lin
      Wen has served as Corporate Secretary of Shineco, Inc. and Director of
      Administration and Management of Beijing Tenet Jove Technological Development
      Co., Ltd. since January 2004. From July 2002 to December 2003, she worked as
      Director of the general office of Sales at Shandong Chenming Paper Holdings
      Ltd., and from July 2000 to June 2002 as assistant to the general manager of
      Hangzhou Wahaha Group Co., Ltd. Ms. 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
      an
      Initial Statement of Beneficial Ownership of Securities on Form 3 at the time
      they acquired their ownership in the Company’s stock.





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





As
      of
      December 31, 2005, none of the Company’s executive officers or directors
      currently serving as such had annual compensation which exceeded US$100,000
      in
      any of the last three fiscal years.





Other
      than reimbursement for expenses, no officer or director received any
      remuneration from the Corporation during the fiscal year ended December 31,
      2005, except for Yuying Zhang, who received annual compensation of $11,600.
      Directors of the Company do not receive any compensation. 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 such programs in the future.


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          40
          -


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





The
      following table sets forth, as of the end of the Company’s most recent fiscal
      year, 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.





1.1Name
            
            1.2Address
            
            Number
                of Shares
            
            1.3PercentageYuying
                Zhang
            
            Suite
                1203, Dingxiang Garden of Wanke Xincheng, Xin Yibai Avenue, Beichen
                District,
              Tianjin,
                China, PC: 300402
            
            2,715,148
            
            29.20%Min
                Zhao
            
            Suite
                1203, Dingxiang Garden of Wanke Xincheng, Xin Yibai Avenue, Beichen
                District,
              Tianjin,
                China, PC: 300402
            
            1,810,099
            
            19.47%Shuangpeng
                Tian
            
            Electric
                Power Bureau of Renqiu City,
              Hebei
                Province,China,
                PC:062550
            
            1,176,564
            
            12.65%Guocong
                Zhou
            
            Suite
                233, 5 Nongfengli, North Chaoyang Street, Chaoyang District,
              Beijing,
                China, PC: 100020
            
            1,176,564
            
            12.65%Weixing
                Yin
            
            Suite
                1704, Building 1, Modern City, 88 Jianguo Street, Chaoyang District,
              Beijing,
                China, PC: 100022
            
            814,545
            
            8.76%Li
                Shi
            
            Suite
                401, Entrance 2, Building 26, Dinghuisi Dongli, Haidian District,
              Beijing,
                China, PC: 100036
            
            814,545
            
            8.76%Guiqing
                Liu
            
            Suite
                10, Entrance 7, 7 Fenzi Hutong, Xicheng District,
              Beijing,
                China, PC: 100032
            
            543,030
            
            5.84%All
                officers and directors as a group (3 persons)
            
            
            
            4,706,257
            
            50.61%





**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.





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





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





Exhibit
      No.


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





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


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          41
          -




**ITEM
      14. Principal Accountant Fees and Services**





Audit
      Fees





Child,
      Van Wagoner & Bradshaw, PLLC provided audit services to us for our annual
      reports for the fiscal years ended December 31, 2005 and 2004.The aggregate
      fees
      billed by them for the 2005 audit of our annual financial statements and review
      of financial statements included 10-QSBs was approximately $22,500 and $2,500,
      respectively.





Audit-Related
      Fees





There
      were no fees billed in 2005 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 2005 for professional services rendered by
      our
      auditors for tax advice and planning.





All
      Other
      Fees





There
      were no fees billed for the year 2005 for professional services rendered by
      our
      auditors for all other services not disclosed above.








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          42
          -




**SIGNATURES**




In
      accordance with the Exchange Act, the registrant caused this report to be signed
      on its behalf by the undersigned, thereunto duly authorized.





Dated:
      May 10, 2007





SHINECO,
      INC.








________________________


By:
      Yuying Zhang


Chairman,
      CEO, and Principal Executive Officer








________________________


By:
      Dan
      Liu


CFO
      and
      Principal Accounting 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.





By:
      Yuying Zhang,


Director,
      CEO and President




By:
      Dan
      Liu,


Director,
      CFO




By:
      Weixing Yin, Diector




By:
      Shuangpeng Tian, Director




By:
      Xiaoguang Zhang, Director





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