----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-QSB**

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

**June 30, 2006**

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

**SHINECO,      INC.**

| **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**

**Beijing,      PR China 100022**

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

**Securities      registered under Section 12(b) of the Act:**

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

----

**APPLICABLE      ONLY TO CORPORATE ISSUERS**

| Class                of Stock                 |   | Outstanding                June 30, 2006 |
|-----------------------------------------------|--------|------------------------------------------|
| Common                Stock ($.001 par value) |   | 9,298,823                                |

**REPORTS      TO SECURITY HOLDERS**

----

**SHINECO,      INC.**

**Form      10-QSB**

**Table      of Contents**

|                                     |                                                                                                                         | **Page                No.** |
|------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                     |                                                                                                                         |                        |
|                                     | Cautionary                Statement and Risk Factors that May Affect Future Results                                          | 4                           |
|                                     |                                                                                                                         |                        |
| **PART                I**                |                                                                                                                         |
|                                     |                                                                                                                         |                        |
|                   ITEM 1.      | Selected                Financial Statements                                                                                 |                        |
|                                     | Balance                Sheet – June 30, 2006 (unaudited)                                                               | 5                           |
|                                     | Statements                of Operations – Three and Six Months Ended June 30, 2006 and 2005                (unaudited) | 6                           |
|                                     | Statements                of Cash Flows – Three and Six Months Ended June 30, 2006 and 2005                (unaudited) | 7                           |
|                                     | Notes                to Financial Statements (unaudited)                                                                     | 8–                16  |
|                                     |                                                                                                                         |                        |
|                   ITEM 2.      | Management’s                Discussion and Analysis and Plan of Operation                                              | 17                          |
|                                     |                                                                                                                         |                        |
|                   ITEM 3.      | Controls                and Procedures                                                                                       | 20                          |
|                                     |                                                                                                                         |                        |
| **PART                II**               |                                                                                                                         |
|                                     |                                                                                                                         |                        |
|    ITEM                1. | Legal                Proceedings                                                                                             | 22                          |
|                                     |                                                                                                                         |                        |
|                   ITEM 2.      | Changes                in Securities                                                                                         | 22                          |
|                                     |                                                                                                                         |                        |
|                   ITEM 3.      | Defaults                Upon Senior Securities                                                                               | 22                          |
|                                     |                                                                                                                         |                        |
|                   ITEM 4.      | Submission                of Matters to a Vote of Security Holders                                                           | 22                          |
|                                     |                                                                                                                         |                        |
|                   ITEM 5.      | Other                Information                                                                                             | 22                          |
|                                     |                                                                                                                         |                        |
|                   ITEM 6.      | Exhibits                and Reports on Form 8-K                                                                              | 22                          |
|                                     |                                                                                                                         |                        |
|                                     | Signatures                                                                                                                   | 23                          |

----

**CAUTIONARY      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:**

**RISK      FACTORS: **

| ·   | Shineco’s                success depends heavily upon the continued active participation of                our                President, Yuying Zhang, and our Director Weixing                Yin; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                stock is subject to the Penny Stock rules, which impose additional                requirements and suitability standards on stock buyers; these rules                may                decrease the market’s interest in our                stock; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | actions                by competitors that negatively affect us—the Chinese herbal remedy market                is extremely competitive, and we face competition from a number of                larger,                better-funded companies; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                business depends upon continuing product development and technological                change; if we cannot keep up with technological change, we could                suffer                financial losses; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we                depend heavily on our proprietary technology; if we cannot protect                our                patents and proprietary rights, we may lose                business; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we                do the large majority of our business in China; if the Chinese economy                slows down, our business could slow down as                well; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                uncertain legal environment in China could limit the legal protections                available to you; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | the                effects of weather and natural disasters or widespread public health                problems, including the avian flu, could negatively affect our business                and results of operations; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes                in China’s political and economic policies could hurt our                business; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | restrictions                on currency exchange may limit our ability to receive or use our                revenues                effectively; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                value of our securities will be affected by the foreign exchange                rate                between U.S. dollars and the Chinese                Renminbi; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                market price for our common stock (if one ever develops) will likely                be                very volatile; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | stockholders                could experience substantial dilution if we issue more stock to raise                more                money; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                large portion of our common stock is controlled by a small number                of                stockholders who in effect control our business, which means you                will have                little or no influence on our                business; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | there                is no established market for our stock, so you may never be able                to sell                your shares; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we                have never paid dividends and do not intend to pay dividends for                the                foreseeable future, given our need to retain earnings to finance                the                development and expansion of our                business; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                risk that you will never see a return on your investment, and the                stock                may become worthless; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | other                risks or uncertainties described elsewhere in this report and in                other                reports we have filed and will file with the Securities and Exchange                Commission (SEC). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**PART      I**

**ITEM      1.    SELECTED FINANCIAL STATEMENTS**

**SHINECO,      INC.**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                                                                                                                                                                                                                                |   | **June                30,****2006** |      |   | **December                31, 2005** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|--------|--------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                          |   |                                |      |   |                                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |
| Current                assets                                                                                                                                                                                                                                                                                                                                                       |   |                                |      |   |                                 |   |
| Cash                and cash equivalents                                                                                                                                                                                                                                                                                                                                            |   | $                                   | 90,109    |   |                                 | $      | 273,367 |   |
| Trade                receivables, net                                                                                                                                                                                                                                                                                                                                               |   |                                | 1,497,077 |   |                                 |   | 1,906,004 |   |
| Other                receivables                                                                                                                                                                                                                                                                                                                                                    |   |                                | 81,840    |   |                                 |   | 275,138 |   |
| Vendor                deposits                                                                                                                                                                                                                                                                                                                                                      |   |                                | 898,232   |   |                                 |   | 178,262 |   |
| Prepaid                expenses                                                                                                                                                                                                                                                                                                                                                     |   |                                | 2,530     |   |                                 |   | 29,813 |   |
| Inventories                                                                                                                                                                                                                                                                                                                                                                         |   |                                | 2,212,259 |   |                                 |   | 1,906,756 |   |
|       Total                current assets                                                                                                                                                                                                                                                                                                             |   |                                | 4,782,047 |   |                                 |   | 4,569,340 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |   |   |
| Property,                plant and equipment, net                                                                                                                                                                                                                                                                                                                                   |   |                                | 175,199   |   |                                 |   | 120,538 |   |
| Related                party receivables                                                                                                                                                                                                                                                                                                                                            |   |                                | 32,025    |   |                                 |   | 41,721 |   |
| Investment                in unconsolidated subsidiaries                                                                                                                                                                                                                                                                                                                            |   |                                | 60,369    |   |                                 |   | 78,335 |   |
| Intangibles,                net                                                                                                                                                                                                                                                                                                                                                     |   |                                | 150,960   |   |                                 |   | 162,674 |   |
| **  Total                assets**                                                                                                                                                                                                                                                                                                                                         |   | $                                   | 5,200,600 |   |                                 | $      | 4,972,608 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                                                             |   |                                |      |   |                                 |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |   |   |
| Current                liabilities                                                                                                                                                                                                                                                                                                                                                  |   |                                |      |   |                                 |   |   |   |
| Trade                payables                                                                                                                                                                                                                                                                                                                                                       |   | $                                   | 1,116,748 |   |                                 | $      | 882,609 |   |
| Related                party payables                                                                                                                                                                                                                                                                                                                                               |   |                                | 234,444   |   |                                 |   | 259,788 |   |
| Accrued                liabilities                                                                                                                                                                                                                                                                                                                                                  |   |                                | 56,582    |   |                                 |   | 41,356 |   |
| Other                payables                                                                                                                                                                                                                                                                                                                                                       |   |                                | 98,786    |   |                                 |   | 84,167 |   |
| Notes                payable                                                                                                                                                                                                                                                                                                                                                        |   |                                | 707,005   |   |                                 |   | 675,324 |   |
| Taxes                payable                                                                                                                                                                                                                                                                                                                                                        |   |                                | 18,595    |   |                                 |   | 41,271 |   |
| Customer                deposits                                                                                                                                                                                                                                                                                                                                                    |   |                                | 77,399    |   |                                 |   | 202,964 |   |
| Accrued                employee benefits                                                                                                                                                                                                                                                                                                                                            |   |                                | 65,483    |   |                                 |   | 49,928 |   |
| Accrued                dividends on preferred stock                                                                                                                                                                                                                                                                                                                                 |   |                                | 49,000    |   |                                 |   | 7,000 |   |
|                        Total current liabilities                                                                                                                                                                                                                                                                                                 |   |                                | 2,424,042 |   |                                 |   | 2,244,407 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |   |   |
| Series                A Convertible preferred stock, net of subscription receivable of                $360,793;                                    par value $.001; liquidation preference $.70 per share; 5,000,000                shares                authorized;                     2,000,000 shares issued and outstanding |   |                                | 1,039,207 |   |                                 |   | 998,935 |   |
|                           Total Liabilities                                                                                                                                                                                                                                                                                       |   |                                | 3,463,249 |   |                                 |   | 3,243,342 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |   |   |
| Minority                interest                                                                                                                                                                                                                                                                                                                                                    |   |                                | 11,538    |   |                                 |   | 12,837 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |   |   |
| Stockholders'                equity                                                                                                                                                                                                                                                                                                                                                 |   |                                |      |   |                                 |   |   |   |
| Common                stock: par value $.001; 25,000,000 shares authorized;                        9,298,823 shares issued and outstanding                                                                                                                                                                                                       |   |                                | 9,299     |   |                                 |   | 9299 |   |
| Additional                paid in capital                                                                                                                                                                                                                                                                                                                                           |   |                                | 1,079,908 |   |                                 |   | 1,079,908 |   |
| Retained                earnings                                                                                                                                                                                                                                                                                                                                                    |   |                                | 577,547   |   |                                 |   | 573,699 |   |
| Accumulated                other comprehensive income                                                                                                                                                                                                                                                                                                                               |   |                                | 59,059    |   |                                 |   | 53,523 |   |
|                            Total stockholders' equity                                                                                                                                                                                                                                                                        |   |                                | 1,725,813 |   |                                 |   | 1,716,429 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                |      |   |                                 |   |   |   |
| **Total                liabilities and stockholders' equity**                                                                                                                                                                                                                                                                                                                       |   | $                                   | 5,200,600 |   |                                 | $      | 4,972,608 |   |

**See      notes to unaudited consolidated financial statements.**

----

**SHINECO,      INC.**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**AND      COMPREHENSIVE INCOME (LOSS)**

|                                                                            |   | **Three                months ended** |       |       | **Six                months ended** |       |
|---------------------------------------------------------------------------------|--------|---------------------------------------|------------|------------|-------------------------------------|------------|
|                                                                            |   | **June                30,**           |       |       | **June                30,**         |       |
|                                                                            |   | **2006**                              | ** ** | ** ** | **2005**                            | ** ** | ** ** | **2006** | ** ** | ** ** | **2005** |   |
|                                                                            |   |                                  |       |       | Restated                            |       |   |   |   |   | Restated |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |
| Revenues                                                                        |   |                                  |       |       |                                |       |   |   |   |   |   |   |
| Sales                revenues                                                   |   | $                                     | 435,040    |       |                                | $          | 295,251 |   |   | $ | 879,088 |   |   | $ | 827,724 |   |
| Cost                of goods sold                                               |   |                                  | 150,314    |       |                                |       | 150,908 |   |   |   | 322,882 |   |   |   | 376,741 |   |
| Gross                profit                                                     |   |                                  | 284,726    |       |                                |       | 144,343 |   |   |   | 556,206 |   |   |   | 450,983 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses                                               |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Other                selling expenses                                           |   |                                  | 49,441     |       |                                |       | 40,750 |   |   |   | 82,467 |   |   |   | 66,359 |   |
| Other                general and administrative expenses                        |   |                                  | 205,174    |       |                                |       | 190,241 |   |   |   | 367,549 |   |   |   | 343,669 |   |
| Total                operating expenses                                         |   |                                  | 254,615    |       |                                |       | 230,991 |   |   |   | 450,016 |   |   |   | 410,028 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Net                operating income                                             |   |                                  | 30,111     |       |                                |       | (86,648 | ) |   |   | 106,190 |   |   |   | 40,955 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Interest                expense                                                 |   |                                  | (30,966    | )          |                                |       | (6,893 | ) |   |   | (50,489 | ) |   |   | (29,354 | ) |
|                    Income (loss)on equity  investments |   |                                  | (10,423    | )          |                                |       | -- |   |   |   | (12,713 | ) |   |   | -- |   |
| Other                                                                           |   |                                  | 1,538      |       |                                |       | 316 |   |   |   | (81 | ) |   |   | 551 |   |
| Total                other income (expense)                                     |   |                                  | (39,851    | )          |                                |       | (6,577 | ) |   |   | (63,283 | ) |   |   | (28,803 | ) |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Income                before taxes and minority interest                        |   |                                  | (9,740     | )          |                                |       | (93,225 | ) |   |   | 42,907 |   |   |   | 12,152 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Provision                for income taxes                                       |   |                                  | --         |       |                                |       | -- |   |   |   | -- |   |   |   | (1,007 | ) |
| Income                before minority interest                                  |   |                                  | (9,740     | )          |                                |       | (93,225 | ) |   |   | 42,907 |   |   |   | 11,145 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Minority                interest in loss (income) of subsidiaries               |   |                                  | 1,783      |       |                                |       | 975 |   |   |   | 2,941 |   |   |   | 975 |   |
|                    Income from continuing operations        |   |                                  | (7,957     | )          |                                |       | (92,250 | ) |   |   | 45,848 |   |   |   | 12,120 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Income(loss)                from operations of disposed subsidiaries            |   |                                  | --         |       |                                |       | 2,380 |   |   |   | -- |   |   |   | 2,455 |   |
|                    Net income(loss) from discontinued operations |   |                                  | --         |       |                                |       | 2,380 |   |   |   | -- |   |   |   | 2,455 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Net                income (Loss)                                                |   | $                                     | (7,957     | )          |                                | $          | (89,870 | ) |   | $ | 45,848 |   |   | $ | 14,575 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation adjustment                          |   |                                  | 2,725      |       |                                |       | -- |   |   |   | 5,536 |   |   |   | -- |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                income (Loss)**                                  |   | $                                     | (5,232     | )          |                                | $          | (89,870 | ) |   | $ | 51,384 |   |   | $ | 14,575 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| **Basic                earnings (loss) per common share:**                      |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| From                continuing operations                                       |   | $                                     | (0.00      | )          |                                | $          | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
| From                discontinued operations                                     |   | $                                     | --         |       |                                | $          | -- |   |   | $ | -- |   |   | $ | -- |   |
| From                net income                                                  |   | $                                     | (0.00      | )          |                                | $          | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| **Diluted                earnings (loss) per common share:**                    |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| From                continuing operations                                       |   | $                                     | (0.00      | )          |                                | $          | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
| From                discontinued operations                                     |   | $                                     | --         |       |                                | $          | -- |   |   | $ | -- |   |   | $ | -- |   |
| From                net income                                                  |   | $                                     | (0.00      | )          |                                | $          | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                            |   |                                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |
| Denominator                for basic earnings per share                         |   |                                  | 9,298,823  |       |                                |       | 9,298,823 |   |   |   | 9,298,823 |   |   |   | 9,298,823 |   |
| Denominator                for diluted earnings per share                       |   |                                  | 9,298,823  |       |                                |       | 9,300,160 |   |   |   | 9,298,823 |   |   |   | 9,300,160 |   |

**See      notes to unaudited consolidated financial statements.**

----

**SHINECO,      INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOW**

|                                                                                                       |   | **Six                months ended June 30,** |     |
|------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|----------|
|                                                                                                       |   | **2006**                                     |     |   | **2005** |   |
|                                                                                                       |   |                                         |     |   | Restated |   |
|                                                                                                       |   |                                         |     |   |   |   |
| **Cash                flows from operating activities:**                                                   |   |                                         |     |   |   |   |
|                   Net income                                                                     |   | $                                            | 45,848   |   |   | $ | 14,575 |   |
| Adjustments                to reconcile net income to net cash provided by                operations:      |   |                                         |     |   |   |   |   |   |
| Depreciation                and amortization                                                               |   |                                         | 20,875   |   |   |   | 23,317 |   |
| Minority                interest                                                                           |   |                                         | (1,642   | ) |   |   | (975 | ) |
| Changes                in operating assets and liabilities:                                                |   |                                         |     |   |   |   |   |   |
| Trade                receivables                                                                           |   |                                         | 408,927  |   |   |   | 25,756 |   |
| Other                receivables                                                                           |   |                                         | 154,125  |   |   |   | -86,656 |   |
| Vendor                deposits                                                                             |   |                                         | (719,970 | ) |   |   | 33,621 |   |
| Prepaid                expenses                                                                            |   |                                         | 27,283   |   |   |   | (30,955 | ) |
| Inventories                                                                                                |   |                                         | (305,503 | ) |   |   | (90,863 | ) |
| Trade                payables                                                                              |   |                                         | 234,109  |   |   |   | (13,362 | ) |
| Accrued                liabilities                                                                         |   |                                         | 15,226   |   |   |   | 67,915 |   |
| Other                payables                                                                              |   |                                         | 13,320   |   |   |   | 1,148,326 |   |
| Taxes                payable                                                                               |   |                                         | (22,676  | ) |   |   | (69,842 | ) |
| Customer                deposits                                                                           |   |                                         | (125,565 | ) |   |   | (208,759 | ) |
| Accrued                employee benefits                                                                   |   |                                         | 15,555   |   |   |   | -- |   |
| **                         Net cash used in operations**      |   |                                         | (240,088 | ) |   |   | 812,098 |   |
|                                                                                                       |   |                                         |     |   |   |   |   |   |
| Cash                flows from investing activities:                                                       |   |                                         |     |   |   |   |   |   |
| Purchase                of property and equipment                                                          |   |                                         | (5,011   | ) |   |   | (6,933 | ) |
| Related                party receivable                                                                    |   |                                         | 9,696    |   |   |   | -- |   |
| **                      Net cash used in investing activities**              |   |                                         | 4,685    |   |   |   | (6,933 | ) |
|                                                                                                       |   |                                         |     |   |   |   |   |   |
| **Cash                flows from financing activities:**                                                   |   |                                         |     |   |   |   |   |   |
| Related                party payables                                                                      |   |                                         | (25,344  | ) |   |   | 79,046 |   |
| Repayments                on short-term notes payable                                                      |   |                                         | --       |   |   |   | (588,201 | ) |
| Proceeds                from short term loans                                                              |   |                                         | 31,681   |   |   |   | (314,009 | ) |
| Proceeds                from sale of preferred stock                                                       |   |                                         | 40,272   |   |   |   | -- |   |
| **                      Net cash provided by financing activities**          |   |                                         | 46,609   |   |   |   | (823,164 | ) |
|                                                                                                       |   |                                         |     |   |   |   |   |   |
| Effect                of rate changes on cash                                                              |   |                                         | 5,536    |   |   |   | -- |   |
|                                                                                                       |   |                                         |     |   |   |   |   |   |
| Decrease                in cash and cash equivalents                                                       |   |                                         | (183,258 | ) |   |   | (17,999 | ) |
|                    Cash and cash equivalents, beginning of period                           |   |                                         | 273,367  |   |   |   | 64,272 |   |
| **                   Cash and cash equivalents, end of period**                             |   | $                                            | 90,109   |   |   | $ | 46,273 |   |
|                                                                                                       |   |                                         |     |   |   |   |   |   |
| **Supplemental                disclosures of cash flow information:**                                      |   |                                         |     |   |   |   |   |   |
|                    Cash paid for interest                                                   |   | $                                            | 70,799   |   |   | $ | 29,354 |   |
|                    Cash paid for income taxes                                               |   | $                                            | --       |   |   | $ | 65,658 |   |
|                                                                                                       |   |                                         |     |   |   |   |   |   |
| **Supplemental                disclosures of non-cash investing and financing                activities:** |   |                                         |     |   |   |   |   |   |
|                    Preferred stock dividends accrued, but not paid                          |   | $                                            | 42,000   |   |   | $ | -- |   |
|                    Office furnishings                                                       |   | $                                            | 56,250   |   |   | $ | -- |   |

**See      notes to unaudited consolidated financial statements.**

----

**SHINECO,      INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**1.   NATURE      OF OPERATIONS**

**2.   BASIS      OF PRESENTATION**

**3.   SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES**

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

| Machinery                and equipment | 10                years |
|----------------------------------------|-------------------------|
| Vehicles                               | 7                years  |
| Office                equipment        | 7                years  |
| Office                furnishings      | 5                years  |

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                             |   | **Six                months ended June 30,** |      |
|--------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|
|                                                                                             |   | **2006**                                     |      |   | **2005** |   |
|                                                                                             |   |                                         |      |   |   |   |
| **NUMERATOR                FOR BASIC AND DILUTED EPS**                                           |   |                                         |      |   |   |   |
| Income                from continuing operations                                                 |   |                                         | 45,848    |   |   |   | 12,120 |   |
| Accrued                dividend on Series A Preferred stock                                      |   |                                         | (42,000   | ) |   |   | -- |   |
| Income                from continuing operations available to common                shareholders |   |                                         | 3,848     |   |   |   | 12,120 |   |
| Income                (loss) from discontinued operations                                        |   |                                         | --        |   |   |   | 2,455 |   |
| Net                income to common stockholders                                                 |   | $                                            | 3,848     |   |   | $ | 14,575 |   |
|                                                                                             |   |                                         |      |   |   |   |   |   |
| **DENOMINATOR                FOR BASIC EPS**                                                     |   |                                         |      |   |   |   |   |   |
| Weighted                average shares of common stock outstanding                               |   |                                         | 9,298,823 |   |   |   | 9,298,823 |   |
| EPS                - Basic from continuing operations                                            |   | $                                            | 0.00      |   |   | $ | 0.00 |   |
| EPS                - Basic from discontinued operations                                          |   | $                                            | --        |   |   | $ | 0.00 |   |
| EPS                - Basic                                                                       |   | $                                            | 0.00      |   |   | $ | 0.00 |   |
|                                                                                             |   |                                         |      |   |   |   |   |   |
| **DENOMINATOR                FOR FULLY DILUTED EPS**                                             |   |                                         |      |   |   |   |   |   |
| Weighted                average shares of common stock outstanding                               |   |                                         | 9,298,823 |   |   |   | 9,298,823 |   |
| Exercisable                warrants                                                              |   |                                         | --        |   |   |   | 1,337 |   |
| Series                A Preferred stock conversion rights                                        |   |                                         | --        |   |   |   | -- |   |
| Weighted                average common shares and warrants outstanding                           |   |                                         | 9,298,823 |   |   |   | 9,300,160 |   |
| EPS                - Fully diluted from continuing operations                                    |   | $                                            | 0.00      |   |   | $ | 0.00 |   |
| EPS                - Fully diluted from discontinued operations                                  |   | $                                            | --        |   |   | $ | 0.00 |   |
| EPS                - Fully diluted                                                               |   | $                                            | 0.00      |   |   | $ | 0.00 |   |

**4.   COMMON      AND PREFERRED STOCK TRANSACTIONS**

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**5.   RELATED      PARTY TRANSACTIONS**

**6.   PROPERTY,      PLANT AND EQUIPMENT**

|                                                         |   | **June                30,****2006** |    |   | **December                31,2005** |   |
|--------------------------------------------------------------|--------|-------------------------------------|---------|--------|-------------------------------------|--------|
|                                                         |   |                                |    |   |                                |   |
| Machinery                and equipment                       |   | $                                   | 28,146  |   |                                | $      | 27,270 |   |
| Vehicles                                                     |   |                                | 54,140  |   |                                |   | 52,455 |   |
| Office                equipment                              |   |                                | 79,021  |   |                                |   | 74,010 |   |
| Office                furnishings                            |   |                                | 56,250  |   |                                |   | - |   |
|                    Subtotal                   |   |                                | 217,557 |   |                                |   | 153,735 |   |
| Less:                accumulated depreciation                |   |                                | 42,358  |   |                                |   | 33,197 |   |
|                    Net property and equipment |   | $                                   | 175,199 |   |                                | $      | 120,538 |   |

**7.   INVESTMENTS**

| **Name**  |   | **Date                Acquired** |   | **Ownership** |   |   | **Initial                Investment** |   |    | **Share                of Income/Loss** |   | **Date                Withdrawal** |    | **Investment                Withdrawal** |     |   | **06/30/06                Investment** |   |
|-----------|--------|----------------------------------|--------|---------------|--------|--------|---------------------------------------|--------|---------|----------------------------------------------|--------|------------------------------------|---------|------------------------------------------|----------|--------|----------------------------------------|--------|
| Jinan     |   | 11/25/2005                       |   |          | 25.00  | %      |                                  | $      | 48,825  |                                         |   | $                                  | (13,142 | )                                        |     |   |                                   |   |   | $ | 35,683 |   |
| Changchun |   | 10/26/2005                       |   |          | 25.00  | %      |                                  |   | 13,567  |                                         |   |                               | 1,547   |                                     |     |   |                                   |   |   |   | 15,114 |   |
| Yantai    |   | 10/26/2005                       |   |          | 25.00  | %      |                                  |   | 22,091  |                                         |   |                               | (12,222 | )                                        | 6/2/2006 |   |                                   | 9,869  |   |   |   | - |   |
| Liaoyang  |   | 12/31/2005                       |   |          | 25.00  | %      |                                  |   | 4,707   |                                         |   |                               | (1,514  | )                                        |     |   |                                   |   |   |   |   | 3,193 |   |
| Xuzhou    |   | 7/26/2005                        |   |          | 15.00  | %      |                                  |   | 3,609   |                                         |   |                               | (1,326  | )                                        |     |   |                                   |   |   |   |   | 2,283 |   |
| Huaian    |   | 7/26/2005                        |   |          | 15.00  | %      |                                  |   | 3,937   |                                         |   |                               | (3,937  | )                                        | 1/4/2006 |   |                                   |   |   |   |   | - |   |
| Shenyang  |   | 9/26/2005                        |   |          | 15.00  | %      |                                  |   | 263     |                                         |   | N/A                                |    |                                     |     |   |                                   |   |   | $ | 263 |   |
| Shenzhen  |   | 12/31/2005                       |   |          | 15.00  | %      |                                  |   | 2,491   |                                         |   | N/A                                |    | 6/2/2006                                 |     |   | 2,491                                  |   |   |   | -- |   |
| Qiqihaer  |   | 1/4/2006                         |   |          | 19.00  | %      |                                  |   | 7,107   |                                         |   |                               | (3,274  | )                                        |     |   |                                   |   |   |   |   | 3,833 |   |
| Totals    |   |                             |   |          |   |   |                                  | $      | 106,597 |                                         |   | $                                  | (33,868 | )                                        |     |   | $                                      | 12,360 |   |   | $ | 60,369 |   |

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**8.   INTANGIBLES**

**9.   CUSTOMER      DEPOSITS**

**10.  COMMITMENTS**

| 2006       |   | $      | 44,521  |   |
|------------|--------|--------|---------|--------|
| 2007       |   |   | 59,362  |   |
| 2008       |   |   | 44,521  |   |
| 2009       |   |   | --      |   |
| 2010       |   |   | --      |   |
| **Totals** |   | $      | 148,404 |   |

**11.  CONTINGENCIES**

**12.  STOCK      WARRANTS**

**13.  NEW      ACCOUNTING PRONOUNCEMENTS**

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**14.  RESTATEMENT**

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                        |   | **Three                months ended****June                30, 2005** |      |   | **Six                months ended****June                30, 2005** |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|-----------|--------|---------------------------------------------------------------------|--------|
|                                                                        |   | **Restated**                                                          |      |   | Original                                                            |   |   | **Restated** |   |   | Original |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |
| **Revenues**                                                                |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |
|                   Sales revenues                                  |   | $                                                                     | 295,251   |   |                                                                | $      | 459,126 |   |   | $ | 827,724 |   |   | $ | 1,256,514 |   |
|                   Cost of goods sold                              |   |                                                                  | 150,908   |   |                                                                |   | 261,656 |   |   |   | 376,741 |   |   |   | 602,287 |   |
| Gross                profit                                                 |   |                                                                  | 144,343   |   |                                                                |   | 197,470 |   |   |   | 450,983 |   |   |   | 654,227 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses                                           |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
|                    Other selling expenses                    |   |                                                                  | 40,750    |   |                                                                |   | 108,008 |   |   |   | 66,359 |   |   |   | 267,148 |   |
|                    Other general and administrative expenses |   |                                                                  | 190,241   |   |                                                                |   | 168,122 |   |   |   | 343,669 |   |   |   | 332,729 |   |
| Total                operating expenses                                     |   |                                                                  | 230,991   |   |                                                                |   | 276,130 |   |   |   | 410,028 |   |   |   | 599,877 |   |
| Operating                income                                             |   |                                                                  | (86,648   | )      |                                                                |   | (78,660 | ) |   |   | 40,955 |   |   |   | 54,350 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense)                                       |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
|                    Interest expense                          |   |                                                                  | (6,893    | )      |                                                                |   | (6,893 | ) |   |   | (29,354 | ) |   |   | (29,354 | ) |
|                    Other                                     |   |                                                                  | 316       |   |                                                                |   | 316 |   |   |   | 551 |   |   |   | 551 |   |
| Total                other income (expense)                                 |   |                                                                  | (6,577    | )      |                                                                |   | (6,577 | ) |   |   | (28,803 | ) |   |   | (28,803 | ) |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
|                    Income before taxes and minority interest |   |                                                                  | (93,225   | )      |                                                                |   | (85,237 | ) |   |   | 12,152 |   |   |   | 25,547 |   |
|                    Provision for income taxes                |   |                                                                  | --        |   |                                                                |   | -- |   |   |   | 1,007 |   |   |   | 1,007 |   |
| Income                before minority interest                              |   |                                                                  | (93,225   | )      |                                                                |   | (85,237 | ) |   |   | 11,145 |   |   |   | 24,540 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Minority                interest in (income)/loss of subsidiaries           |   |                                                                  | 975       |   |                                                                |   | 837 |   |   |   | 975 |   |   |   | 975 |   |
| Income                from continuing operations                            |   |                                                                  | (92,250   | )      |                                                                |   | (84,400 | ) |   |   | 12,120 |   |   |   | 25,515 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) from operations of disposed subsidiaries       |   |                                                                  | 2,380     |   |                                                                |   | -- |   |   |   | 2,455 |   |   |   | -- |   |
| Net                income (loss) from discontinued operations               |   |                                                                  | 2,380     |   |                                                                |   | -- |   |   |   | 2,455 |   |   |   | -- |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| **Net                income**                                               |   | $                                                                     | (89,870   | )      |                                                                | $      | (84,400 | ) |   | $ | 14,575 |   |   | $ | 25,515 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation adjustment                      |   |                                                                  | --        |   |                                                                |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                income**                                     |   | $                                                                     | (89,870   | )      |                                                                | $      | (84,400 | ) |   | $ | 14,575 |   |   | $ | 25,515 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                earnings (loss) per common share:**                  |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
|                    From continuing operations                |   | $                                                                     | (0.01     | )      |                                                                | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                    From discontinued operations              |   | $                                                                     | 0.00      |   |                                                                | $      | -- |   |   | $ | 0.00 |   |   | $ | -- |   |
|                    From net income                           |   | $                                                                     | (0.01     | )      |                                                                | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                earnings (loss) per common share:**                |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
|                    From continuing operations                |   | $                                                                     | (0.01     | )      |                                                                | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                    From discontinued operations              |   | $                                                                     | 0.00      |   |                                                                | $      | -- |   |   | $ | 0.00 |   |   | $ | -- |   |
|                    From net income                           |   | $                                                                     | (0.01     | )      |                                                                | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                        |   |                                                                  |      |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Denominator                for basic earnings per share                     |   |                                                                  | 9,298,823 |   |                                                                |   | 9,298,823 |   |   |   | 9,298,823 |   |   |   | 9,298,823 |   |
| Denominator                for diluted earnings per share                   |   |                                                                  | 9,300,160 |   |                                                                |   | 9,300,160 |   |   |   | 9,300,160 |   |   |   | 9,300,160 |   |

----

**SHINECO,        INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                           |   | **Six                months ended June 30, 2005** |      |
|--------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|
|                                                                                                                           |   | Restated                                          |      |   | Original |   |
|                                                                                                                           |   | 2005                                              |      |   | 2005 |   |
|                                                                                                                           |   |                                              |      |   |   |   |
| **Cash                flows from operating activities:**                                                                       |   |                                              |      |   |   |   |
|                  Net income                                                                                               |   | $                                                 | 14,575    |   |   | $ | 25,515 |   |
| Adjustments                to reconcile net income to net cash used in operations:                                             |   |                                              |      |   |   |   |   |   |
|   Depreciation                and amortization                                                                       |   |                                              | 23,317    |   |   |   | 12,377 |   |
|                  Minority interest                                                                                        |   |                                              | (975      | ) |   |   | (975 | ) |
| Changes                in operating assets and liabilities:                                                                    |   |                                              |      |   |   |   |   |   |
|                  Trade receivables                                                                                        |   |                                              | 25,756    |   |   |   | 25,756 |   |
|                  Other receivables                                                                                        |   |                                              | (86,656   | ) |   |   | (86,656 | ) |
|                  Vendor deposits                                                                                          |   |                                              | 33,621    |   |   |   | 33,621 |   |
|                  Prepaid expenses                                                                                         |   |                                              | (30,955   | ) |   |   | (30,955 | ) |
|                  Inventories                                                                                              |   |                                              | (90,863   | ) |   |   | (90,863 | ) |
|                  Trade payables                                                                                           |   |                                              | (13,362   | ) |   |   | (13,362 | ) |
|                  Accrued liabilities                                                                                      |   |                                              | 67,915    |   |   |   | 67,915 |   |
|                  Other payables                                                                                           |   |                                              | 1,148,326 |   |   |   | 1,148,326 |   |
|                  Taxes payable                                                                                            |   |                                              | (69,842   | ) |   |   | (69,842 | ) |
|                  Customer deposits                                                                                        |   |                                              | (208,759  | ) |   |   | (208,759 | ) |
| **                          Net cash used in operations**                    |   |                                              | 812,098   |   |   |   | 812,098 |   |
|                                                                                                                           |   |                                              |      |   |   |   |   |   |
| **Cash                flows from investing activities:**                                                                       |   |                                              |      |   |   |   |   |   |
|                  Purchase of property and equipment                                                                       |   |                                              | (6,933    | ) |   |   | (6,933 | ) |
| **                          Net cash used in investing activities**          |   |                                              | (6,933    | ) |   |   | (6,933 | ) |
|                                                                                                                           |   |                                              |      |   |   |   |   |   |
| **Cash                flows from financing activities:**                                                                       |   |                                              |      |   |   |   |   |   |
|                  Related party payables                                                                                   |   |                                              | 79,046    |   |   |   | 79,046 |   |
|                  Repayments on short-term notes payable                                                                   |   |                                              | (588,201  | ) |   |   | (588,201 | ) |
|                  Proceeds from sale of preferred stock                                                                    |   |                                              | --        |   |   |   | -- |   |
|                  Proceeds from short term loans                                                                           |   |                                              | (314,009  | ) |   |   | (314,009 | ) |
| **           Net                cash provided by financing activities** |   |                                              | (823,164  | ) |   |   | (823,164 | ) |
|                                                                                                                           |   |                                              |      |   |   |   |   |   |
| Effect                of rate changes on cash                                                                                  |   |                                              | --        |   |   |   | -- |   |
|                                                                                                                           |   |                                              |      |   |   |   |   |   |
| Increase                in cash and cash equivalents                                                                           |   |                                              | (17,999   | ) |   |   | (17,999 | ) |
|                                                                                                                           |   |                                              |      |   |   |   |   |   |
| Cash                and cash equivalents, beginning of period                                                                  |   |                                              | 64,272    |   |   |   | 64,272 |   |
| **Cash                and cash equivalents, end of period**                                                                    |   | $                                                 | 46,273    |   |   | $ | 46,273 |   |
|                                                                                                                           |   |                                              |      |   |   |   |   |   |
| **Supplemental                disclosures of cash flow information:**                                                          |   |                                              |      |   |   |   |   |   |
|                   Cash paid for interest                                                                             |   | $                                                 | 29,354    |   |   | $ | 29,354 |   |
|                   Cash paid for income taxes                                                                         |   | $                                                 | 65,658    |   |   | $ | 65,658 |   |
|                                                                                                                           |   |                                              |      |   |   |   |   |   |
| **Supplemental                disclosures of non-cash investing and financing                activities:**                     |   |                                              |      |   |   |   |   |   |
|                   Stock issued for services                                                                          |   | $                                                 | --        |   |   | $ | -- |   |
|                   Inventory and intangibles acquired in business combination                                         |   | $                                                 | --        |   |   | $ | -- |   |

----

**ITEM      2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF      OPERATION**

**BUSINESS      OVERVIEW**

**Results      of Operations for Six Months Ended June 30, 2006 Compared to June 30,      2005**

----

----

**Results      of Operations for Three Months Ended June 30, 2006 Compared to June 30,      2005**

----

**ITEM      3.    CONTROLS AND PROCEDURES**

*Quarterly      Evaluation of Controls*

*CEO      and CFO Certifications*

----

*Disclosure      Controls*

*Limitations      on the Effectiveness of Controls*

*Scope      of the Evaluation*

*Conclusions.*

----

**PART      II**

**ITEM      1.    LEGAL PROCEEDINGS**

**ITEM      2.    CHANGES IN SECURITIES**

**ITEM      3.    DEFAULTS UPON SENIOR SECURITIES**

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

**ITEM      5.    OTHER INFORMATION**

**ITEM      6.    EXHIBITS AND REPORTS ON FORM 8-K**

----

**SIGNATURES**

**SHINECO,      INC.**

| /s/                  Yuying Zhang                             |
|---------------------------------------------------------------|
| By:                Yuying Zhang                               |
| Chairman,                CEO, and Principal Executive Officer |
|                                                          |
|                                                          |
|  /s/              Dan Liu                                |
| By:                Dan Liu                                    |
| CFO                and Principal Accounting Officer           |

| /s/                Yuying Zhang             |
|---------------------------------------------|
| By:                Yuying Zhang             |
| Director,                CEO, and President |
|                                        |
|                                        |
|  /s/              Dan Liu              |
| By:                Dan Liu                  |
| Director,                CFO                |
|                                        |
|                                        |
|  /s/              Weixing Yin          |
| By:                Weixing Yin              |
| Director                                    |
|                                        |
|                                        |
|  /s/              Shuangpeng Tian      |
| By:                Shuangpeng Tian          |
| Director                                    |
|                                        |
|                                        |
| /s/              Xiaoguang Zhang            |
| By:                Xiaoguang Zhang          |
| Director                                    |

----