----

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**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**

**September 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 October                30, 2006 |
|-----------------------------------------------|--------|--------------------------------------------------|
| Common                Stock ($.001 par value) |   | 9,298,823                                        |

**REPORTS      TO SECURITY HOLDERS**

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**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 – September 30, 2006 (unaudited)                                                                     | 5                           |
|                                     | Statements                of Operations – Three and Nine Months Ended September 30, 2006                and 2005 (unaudited) | 6                           |
|                                     | Statements                of Cash Flows – Three and Nine Months Ended September 30, 2006 and                2005 (unaudited)      | 7                           |
|                                     | Notes                to Financial Statements (unaudited)                                                                                     | 8–                17  |
|                                     |                                                                                                                                         |                        |
|                   ITEM 2.      | Management’s                Discussion and Analysis and Plan of Operation                                                              | 18                          |
|                                     |                                                                                                                                         |                        |
|                   ITEM 3.      | Controls                and Procedures                                                                                                       | 21                          |
|                                     |                                                                                                                                         |                        |
| **PART                II**               |                                                                                                                                         |
|                                     |                                                                                                                                         |                        |
|    ITEM                1. | Legal                Proceedings                                                                                                             | 23                          |
|                                     |                                                                                                                                         |                        |
|                   ITEM 2.      | Changes                in Securities                                                                                                         | 23                          |
|                                     |                                                                                                                                         |                        |
|                   ITEM 3.      | Defaults                Upon Senior Securities                                                                                               | 23                          |
|                                     |                                                                                                                                         |                        |
|                   ITEM 4.      | Submission                of Matters to a Vote of Security Holders                                                                           | 23                          |
|                                     |                                                                                                                                         |                        |
|                   ITEM 5.      | Other                Information                                                                                                             | 23                          |
|                                     |                                                                                                                                         |                        |
|                   ITEM 6.      | Exhibits                and Reports on Form 8-K                                                                                              | 23                          |
|                                     |                                                                                                                                         |                        |
|                                     | Signatures                                                                                                                                   | 24                          |

----

**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**

|                                                                                                                                                                                                                                                                                         |   | **September                  30,** |      |   | **December                  31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|--------|-----------------------------------|--------|
|                                                                                                                                                                                                                                                                                         |   | **2006**                           |      |   | **2005**                          |   |
|                                                                                                                                                                                                                                                                                         |   | Restated                           |      |   |                              |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |
| **ASSETS**                                                                                                                                                                                                                                                                                   |   |                               |      |   |                              |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |
| **Current                  assets**                                                                                                                                                                                                                                                          |   |                               |      |   |                              |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                                   |   | $                                  | 53,626    |   |                              | $      | 273,367 |   |
| Trade                  receivables, net                                                                                                                                                                                                                                                      |   |                               | 1,383,109 |   |                              |   | 1,906,004 |   |
| Other                  receivables                                                                                                                                                                                                                                                           |   |                               | 332,172   |   |                              |   | 275,138 |   |
| Vendor                  deposits                                                                                                                                                                                                                                                             |   |                               | 985,852   |   |                              |   | 178,262 |   |
| Prepaid                  expenses                                                                                                                                                                                                                                                            |   |                               | 1,968     |   |                              |   | 29,813 |   |
| Inventories                                                                                                                                                                                                                                                                                  |   |                               | 2,094,499 |   |                              |   | 1,906,756 |   |
| **Total                  current assets**                                                                                                                                                                                                                                                    |   |                               | 4,851,226 |   |                              |   | 4,569,340 |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |   |   |
| Property,                  plant and equipment, net                                                                                                                                                                                                                                          |   |                               | 164,661   |   |                              |   | 120,538 |   |
| Related                  party receivables                                                                                                                                                                                                                                                   |   |                               | 54,320    |   |                              |   | 41,721 |   |
| Investment                  in unconsolidated subsidiaries                                                                                                                                                                                                                                   |   |                               | 61,053    |   |                              |   | 78,335 |   |
| Intangibles,                  net                                                                                                                                                                                                                                                            |   |                               | 145,103   |   |                              |   | 162,674 |   |
| **Total                  assets**                                                                                                                                                                                                                                                            |   | $                                  | 5,276,363 |   |                              | $      | 4,972,608 |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                    |   |                               |      |   |                              |   |   |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |   |   |
| **Current                  liabilities**                                                                                                                                                                                                                                                     |   |                               |      |   |                              |   |   |   |
| Trade                  payables                                                                                                                                                                                                                                                              |   | $                                  | 1,116,087 |   |                              | $      | 882,609 |   |
| Related                  party payables                                                                                                                                                                                                                                                      |   |                               | 268,574   |   |                              |   | 259,788 |   |
| Accrued                  liabilities                                                                                                                                                                                                                                                         |   |                               | 74,268    |   |                              |   | 41,356 |   |
| Other                  payables                                                                                                                                                                                                                                                              |   |                               | 166,254   |   |                              |   | 84,167 |   |
| Notes                  payable                                                                                                                                                                                                                                                               |   |                               | 763,458   |   |                              |   | 675,324 |   |
| Taxes                  payable                                                                                                                                                                                                                                                               |   |                               | 490       |   |                              |   | 41,271 |   |
| Customer                  deposits                                                                                                                                                                                                                                                           |   |                               | 59,316    |   |                              |   | 202,964 |   |
| Accrued                  employee benefits                                                                                                                                                                                                                                                   |   |                               | 77,480    |   |                              |   | 49,928 |   |
| Accrued                  dividends on preferred stock                                                                                                                                                                                                                                        |   |                               | 70,000    |   |                              |   | 7,000 |   |
| **  Total                  current liabilities**                                                                                                                                                                                                                                   |   |                               | 2,595,927 |   |                              |   | 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**                                                                                                                                                                                           |   |                               | 3,635,134 |   |                              |   | 3,243,342 |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |   |   |
| Minority                  interest                                                                                                                                                                                                                                                           |   |                               | 8,619     |   |                              |   | 12,837 |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |   |   |
| **Stockholders'                  equity**                                                                                                                                                                                                                                                    |   |                               |      |   |                              |   |   |   |
| Common                  stock: par value $.001; 25,000,000 shares authorized;     9,298,823                  shares issued and outstanding                                                                                                                               |   |                               | 9,299     |   |                              |   | 9,299 |   |
| Additional                  paid in capital                                                                                                                                                                                                                                                  |   |                               | 1,079,908 |   |                              |   | 1,079,908 |   |
| Retained                  earnings                                                                                                                                                                                                                                                           |   |                               | 481,163   |   |                              |   | 573,699 |   |
| Accumulated                  other comprehensive income                                                                                                                                                                                                                                      |   |                               | 62,240    |   |                              |   | 53,523 |   |
| **           Total                  Stockholders' Equity**                                                                                                                                                                            |   |                               | 1,632,610 |   |                              |   | 1,716,429 |   |
|                                                                                                                                                                                                                                                                                         |   |                               |      |   |                              |   |   |   |
| **Total                  Liabilities and Stockholders' Equity**                                                                                                                                                                                                                              |   | $                                  | 5,276,363 |   |                              | $      | 4,972,608 |   |

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

----

**SHINECO,        INC.**

**CONSOLIDATED        STATEMENTS OF OPERATIONS**

**AND        COMPREHENSIVE INCOME (LOSS)**

|                                                                                                     |   | Three                  months ended September 30, |      |   | Nine                  months ended September 30, |   |
|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|--------|--------------------------------------------------|--------|
|                                                                                                     |   | 2006                                              |      |   | 2005                                             |   |   | 2006 |   |   | 2005 |   |
|                                                                                                     |   |                                              |      |   | **Restated**                                     |   |   | **Restated** |   |   | **Restated** |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |
| Revenues                                                                                                 |   |                                              |      |   |                                             |   |   |   |   |   |   |   |
| Sales                  revenues                                                                          |   | $                                                 | 295,434   |   |                                             | $      | 586,595 |   |   | $ | 1,174,522 |   |   | $ | 1,414,319 |   |
| Cost                  of goods sold                                                                      |   |                                              | 134,564   |   |                                             |   | 311,336 |   |   |   | 457,446 |   |   |   | 688,077 |   |
|                     **Gross profit**                                                           |   |                                              | 160,870   |   |                                             |   | 275,259 |   |   |   | 717,076 |   |   |   | 726,242 |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  expenses                                                                      |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Other                  selling expenses                                                                  |   |                                              | 24,583    |   |                                             |   | 11,134 |   |   |   | 107,050 |   |   |   | 77,493 |   |
| Other                  general and administrative expenses                                               |   |                                              | 175,745   |   |                                             |   | 231,510 |   |   |   | 543,294 |   |   |   | 575,179 |   |
| Total                  operating expenses                                                                |   |                                              | 200,328   |   |                                             |   | 242,644 |   |   |   | 650,344 |   |   |   | 652,672 |   |
| **                        Net operating income**                           |   |                                              | (39,458   | )      |                                             |   | 32,615 |   |   |   | 66,732 |   |   |   | 73,570 |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense)                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense                                                                        |   |                                              | (22,808   | )      |                                             |   | (45,832 | ) |   |   | (73,297 | ) |   |   | (75,186 | ) |
|     Income(loss)on                  equity  investments                    |   |                                              | (14,465   | )      |                                             |   | -- |   |   |   | (27,178 | ) |   |   | -- |   |
| Other                                                                                                    |   |                                              | (1,692    | )      |                                             |   | (6,770 | ) |   |   | (1,773 | ) |   |   | (6,219 | ) |
| **   Total                  other income (expense)**                                      |   |                                              | (38,965   | )      |                                             |   | (52,602 | ) |   |   | (102,248 | ) |   |   | (81,405 | ) |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before taxes and minority interest                                               |   |                                              | (78,423   | )      |                                             |   | (19,987 | ) |   |   | (35,516 | ) |   |   | (7,835 | ) |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Provision                  for income taxes                                                              |   |                                              |      |   |                                             |   |   |   |   |   | -- |   |   |   | (1,007 | ) |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before minority interest                                                         |   |                                              | (78,423   | )      |                                             |   | (19,987 | ) |   |   | (35,516 | ) |   |   | (8,842 | ) |
| Minority                  interest in loss (income) of subsidiaries                                      |   |                                              | 3,039     |   |                                             |   | 3,297 |   |   |   | 5,980 |   |   |   | 4,272 |   |
|                         Income  from continuing operations       |   |                                              | (75,384   | )      |                                             |   | (16,690 | ) |   |   | (29,536 | ) |   |   | (4,570 | ) |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income(loss)                  from operations of disposed subsidiaries                                   |   |                                              | --        |   |                                             |   | 7,237 |   |   |   | -- |   |   |   | 9,692 |   |
|        Net                  income(loss) from discontinued operations |   |                                              | --        |   |                                             |   | 7,237 |   |   |   | -- |   |   |   | 9,692 |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income (Loss)**                                                                   |   | $                                                 | (75,384   | )      |                                             | $      | (9,453 | ) |   | $ | (29,536 | ) |   | $ | 5,122 |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation adjustment                                                 |   |                                              | 3,181     |   |                                             |   | 37,683 |   |   |   | 8,717 |   |   |   | 37,683 |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                  Income (Loss)**                                                         |   | $                                                 | (72,203   | )      |                                             | $      | 28,230 |   |   | $ | (20,819 | ) |   | $ | 42,805 |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                  earnings (loss) per common share:**                                             |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| From                  continuing operations                                                              |   | $                                                 | (0.01     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.00 | ) |
| From                  discontinued operations                                                            |   | $                                                 | -         |   |                                             | $      | - |   |   | $ | - |   |   | $ | - |   |
| From                  net income                                                                         |   | $                                                 | (0.01     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | 0.00 |   |
|                                                                                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  earnings (loss) per common share:**                                           |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| From                  continuing operations                                                              |   | $                                                 | (0.01     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.00 | ) |
| From                  discontinued operations                                                            |   | $                                                 | -         |   |                                             | $      | - |   |   | $ | - |   |   | $ | - |   |
| From                  net income                                                                         |   | $                                                 | (0.01     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | 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**

|                                                                                                              |   | Nine                    months ended September 30, |     |
|-------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|----------|
|                                                                                                              |   | 2006                                               |     |   | 2005 |   |
|                                                                                                              |   | **Restated**                                       |     |   | **Restated** |   |
|                                                                                                              |   |                                               |     |   |   |   |
| **Cash                    flows from operating activities:**                                                      |   |                                               |     |   |   |   |
| Net                    income                                                                                     |   | $                                                  | (29,536  | ) |   | $ | 5,122 |   |
| Adjustments                    to reconcile net income to net cash used in operations:                            |   |                                               |     |   |   |   |   |   |
| Depreciation                    and amortization                                                                  |   |                                               | 31,063   |   |   |   | 35,886 |   |
| Minority                    interest                                                                              |   |                                               | (1,762   | ) |   |   | (4,639 | ) |
| Changes                    in operating assets and liabilities:                                                   |   |                                               |     |   |   |   |   |   |
| Trade                    receivables                                                                              |   |                                               | 522,895  |   |   |   | (355,209 | ) |
| Other                    receivables                                                                              |   |                                               | (57,034  | ) |   |   | (143,141 | ) |
| Vendor                    deposits                                                                                |   |                                               | (807,590 | ) |   |   | 132,650 |   |
| Prepaid                    expenses                                                                               |   |                                               | 27,845   |   |   |   | 8,372 |   |
| Inventories                                                                                                       |   |                                               | (187,743 | ) |   |   | 75,616 |   |
| Trade                    payables                                                                                 |   |                                               | 233,478  |   |   |   | (57,857 | ) |
| Accrued                    liabilities                                                                            |   |                                               | 32,912   |   |   |   | 79,214 |   |
| Other                    payables                                                                                 |   |                                               | 77,869   |   |   |   | 1,562,686 |   |
| Taxes                    payable                                                                                  |   |                                               | (40,781  | ) |   |   | (68,654 | ) |
| Customer                    deposits                                                                              |   |                                               | (143,648 | ) |   |   | (372,827 | ) |
| Accrued                    employee benefits                                                                      |   |                                               | 27,552   |   |   |   | -- |   |
| **                         Net cash provided by operations**                             |   |                                               | (314,480 | ) |   |   | 897,219 |   |
|                                                                                                              |   |                                               |     |   |   |   |   |   |
| **Cash                    flows from investing activities:**                                                      |   |                                               |     |   |   |   |   |   |
| Purchase                    of property and equipment                                                             |   |                                               | (1,365   | ) |   |   | (19,841 | ) |
| Related                    party receivable                                                                       |   |                                               | 12,599   |   |   |   | 80,902 |   |
| **                         Net cash provided by investing activities**                   |   |                                               | 11,234   |   |   |   | 61,061 |   |
|                                                                                                              |   |                                               |     |   |   |   |   |   |
| **Cash                    flows from financing activities:**                                                      |   |                                               |     |   |   |   |   |   |
| Related                    party payables                                                                         |   |                                               | 8,786    |   |   |   | (602,015 | ) |
| Repayments                    on short-term notes payable                                                         |   |                                               | --       |   |   |   | (321,384 | ) |
| Proceeds                    from short term loans                                                                 |   |                                               | 25,730   |   |   |   |   |   |
| Proceeds                    from sale of preferred stock                                                          |   |                                               | 40,272   |   |   |   | -- |   |
| **                         Net cash used in financing activities**                       |   |                                               | 74,788   |   |   |   | (923,399 | ) |
|                                                                                                              |   |                                               |     |   |   |   |   |   |
| Effect                    of rate changes on cash                                                                 |   |                                               | 8,717    |   |   |   | 2,015 |   |
|                                                                                                              |   |                                               |     |   |   |   |   |   |
| Decrease                    in cash and cash equivalents                                                          |   |                                               | (219,741 | ) |   |   | 36,895 |   |
|                                                                                                              |   |                                               |     |   |   |   |   |   |
| Cash                    and cash equivalents, beginning of period                                                 |   |                                               | 273,367  |   |   |   | 64,272 |   |
| **                         Cash and cash equivalents, end of period**                    |   | $                                                  | 53,626   |   |   | $ | 101,167 |   |
|                                                                                                              |   |                                               |     |   |   |   |   |   |
| **Supplemental                    disclosures of cash flow information:**                                         |   |                                               |     |   |   |   |   |   |
|                       Cash paid for interest                                                            |   | $                                                  | 73,297   |   |   | $ | 76,952 |   |
|                       Cash paid for income taxes                                                        |   | $                                                  | --       |   |   | $ | 67,200 |   |
|                                                                                                              |   |                                               |     |   |   |   |   |   |
| **Supplemental                    disclosures of non-cash investing and financing                    activities** |   |                                               |     |   |   |   |   |   |
|    Preferred                    stock dividends accrued but not paid                               |   | $                                                  | 63,000   |   |   | $ | -- |   |
|                       Office furnishings                                                                |   | $                                                  | 56,250   |   |   | $ | -- |   |

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

----

**SHINECO,        INC.**

**1.         NATURE OF OPERATIONS**

**2.   BASIS        OF PRESENTATION**

**3.   SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES**

----

**SHINECO,        INC.**

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

----

**SHINECO,        INC.**

----

**SHINECO,        INC.**

|                                                                                                 |   | Nine                  Months ended September 30, |      |
|------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                                                                 |   | 2006                                             |      |   | 2005 |   |
|                                                                                                 |   |                                             |      |   |   |   |
| **NUMERATOR                  FOR BASIC AND DILUTED EPS**                                             |   |                                             |      |   |   |   |
| Income                  from continuing operations                                                   |   |                                             | (13,126   | ) |   |   | 11,840 |   |
| Accrued                  dividend on Series A Preferred stock                                        |   |                                             | (63,000   | ) |   |   | -- |   |
| Income                  from continuing operations available to common                  shareholders |   |                                             | (76,126   | ) |   |   | 11,840 |   |
| Income                  (loss) from discontinued operations                                          |   |                                             | --        |   |   |   | 9,692 |   |
| **Net                  income to common stockholders**                                               |   | $                                                | (76,126   | ) |   | $ | 21,532 |   |
|                                                                                                 |   |                                             |      |   |   |   |   |   |
| **DENOMINATOR                  FOR BASIC EPS**                                                       |   |                                             |      |   |   |   |   |   |
| Weighted                  average shares of common stock outstanding                                 |   |                                             | 9,298,823 |   |   |   | 9,298,823 |   |
| EPS                  - Basic from continuing operations                                              |   | $                                                | (0.01     | ) |   | $ | 0.00 |   |
| EPS                  - Basic from discontinued operations                                            |   | $                                                | -         |   |   | $ | 0.00 |   |
| EPS                  - Basic                                                                         |   | $                                                | (0.01     | ) |   | $ | 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                                      |   | $                                                | (0.01     | ) |   | $ | 0.00 |   |
| EPS                  - Fully diluted from discontinued operations                                    |   | $                                                | --        |   |   | $ | 0.00 |   |
| EPS                  - Fully diluted                                                                 |   | $                                                | (0.01     | ) |   | $ | 0.00 |   |

**4.   COMMON        AND PREFERRED STOCK TRANSACTIONS**

----

**SHINECO,        INC.**

**5.   RELATED        PARTY TRANSACTIONS**

**6.   PROPERTY,        PLANT AND EQUIPMENT**

|                                                                          |   | **September                  30,2006** |    |   | **December                  31,2005** |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------|---------|--------|---------------------------------------|--------|
|                                                                          |   |                                   |    |   |                                  |   |
| Machinery                  and equipment                                      |   | $                                      | 28,390  |   |                                  | $      | 27,270 |   |
| Vehicles                                                                      |   |                                   | 53,526  |   |                                  |   | 52,455 |   |
| Office                  equipment                                             |   |                                   | 73,747  |   |                                  |   | 74,010 |   |
| Office                  furnishings                                           |   |                                   | 55,124  |   |                                  |   | - |   |
| Subtotal                                                                      |   |                                   | 211,350 |   |                                  |   | 153,735 |   |
|      Less:                  accumulated depreciation |   |                                   | (46,689 | )      |                                  |   | (33,197 | ) |
| Net                  property and equipment                                   |   | $                                      | 164,661 |   |                                  | $      | 120,538 |   |

**7.   INVESTMENTS**

| **Name**   | **Date****Acquired** |   | **Ownership** |   |   | **Initial****Investment** |   |    | **Share                  of Income/Loss** |   | **Date****Withdrawal** |    | **Investment                  Withdrawal** |     |   | **09/30/06                  Investment** |   |
|------------|----------------------|--------|---------------|--------|--------|---------------------------|--------|---------|-------------------------------------------|--------|------------------------|---------|--------------------------------------------|----------|--------|------------------------------------------|--------|
|       |                 |   |          |   |   |                      |   |    |                                      |   |                   |    |                                       |     |   |                                     |   |
| Jinan      | 11/25/2005           |   |          | 25.00% |   |                      | $      | 48,825  |                                      |   | $                      | (22,219 | )                                          |     |   |                                     |   |   | $ | 26,606 |   |
| Changchun  | 10/26/2005           |   |          | 25.00% |   |                      |   | 13,567  |                                      |   |                   | 6,376   |                                       |     |   |                                     |   |   |   | 19,943 |   |
| Yantai     | 10/26/2005           |   |          | 25.00% |   |                      |   | 22,091  |                                      |   |                   | (12,222 | )                                          | 6/2/2006 |   |                                     | 9,869  |   |   |   | -- |   |
| Liaoyang   | 12/31/2005           |   |          | 25.00% |   |                      |   | 4,707   |                                      |   |                   | (4,168  | )                                          |     |   |                                     |   |   |   |   | 539 |   |
| Xuzhou     | 7/26/2005            |   |          | 15.00% |   |                      |   | 3,609   |                                      |   |                   | 485     |                                       |     |   |                                     |   |   |   |   | 4,094 |   |
| 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   |                                      |   |                   | (1,311  | )                                          |     |   |                                     |   |   |   |   | 5,796 |   |
| Nanjing    | 8/31/2006            |   |          | 15.00% |   |                      |   | 15,149  |                                      |   |                   | (11,337 | )                                          |     |   |                                     |   |   |   |   | 3,812 |   |
| **Totals** |                 |   |          |   |   |                      | $      | 121,746 |                                      |   | $                      | (48,333 | )                                          |     |   | $                                        | 12,360 |   |   | $ | 61,053 |   |

----

**SHINECO,        INC.**

**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.**

----

**SHINECO,        INC.**

**14.   RESTATEMENT**

|                                                                                                                                                                                                                                                                                                           |   | September                  30, |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                           |   | **Restated**                   |      |   | Original |   |
|                                                                                                                                                                                                                                                                                                           |   | 2006                           |      |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                     |   |                           |      |   |   |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |
| **Current                  assets**                                                                                                                                                                                                                                                                            |   |                           |      |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                                                     |   | $                              | 53,626    |   |   | $ | 53,626 |   |
| Trade                  receivables, net                                                                                                                                                                                                                                                                        |   |                           | 1,383,109 |   |   |   | 1,383,109 |   |
| Other                  receivables                                                                                                                                                                                                                                                                             |   |                           | 332,172   |   |   |   | 708,094 |   |
| Vendor                  deposits                                                                                                                                                                                                                                                                               |   |                           | 985,852   |   |   |   | 985,852 |   |
| Prepaid                  expenses                                                                                                                                                                                                                                                                              |   |                           | 1,968     |   |   |   | 1,968 |   |
| Inventories                                                                                                                                                                                                                                                                                                    |   |                           | 2,094,499 |   |   |   | 2,094,499 |   |
| **Total                  current assets**                                                                                                                                                                                                                                                                      |   |                           | 4,851,226 |   |   |   | 5,227,148 |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |   |   |
| Property,                  plant and equipment, net                                                                                                                                                                                                                                                            |   |                           | 164,661   |   |   |   | 164,661 |   |
| Related                  party receivables                                                                                                                                                                                                                                                                     |   |                           | 54,320    |   |   |   | 54,320 |   |
| Investment                  in unconsolidated subsidiaries                                                                                                                                                                                                                                                     |   |                           | 61,053    |   |   |   | 61,053 |   |
| Intangibles,                  net                                                                                                                                                                                                                                                                              |   |                           | 145,103   |   |   |   | 20,983 |   |
| **Total                  assets**                                                                                                                                                                                                                                                                              |   | $                              | 5,276,363 |   |   | $ | 5,528,165 |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                      |   |                           |      |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |   |   |
| **Current                  liabilities**                                                                                                                                                                                                                                                                       |   |                           |      |   |   |   |   |   |
| Trade                  payables                                                                                                                                                                                                                                                                                |   | $                              | 1,116,087 |   |   | $ | 1,116,087 |   |
| Related                  party payables                                                                                                                                                                                                                                                                        |   |                           | 268,574   |   |   |   | 268,574 |   |
| Accrued                  liabilities                                                                                                                                                                                                                                                                           |   |                           | 74,268    |   |   |   | 74,268 |   |
| Other                  payables                                                                                                                                                                                                                                                                                |   |                           | 166,254   |   |   |   | 166,254 |   |
| Notes                  payable                                                                                                                                                                                                                                                                                 |   |                           | 763,458   |   |   |   | 763,458 |   |
| Taxes                  payable                                                                                                                                                                                                                                                                                 |   |                           | 490       |   |   |   | 490 |   |
| Customer                  deposits                                                                                                                                                                                                                                                                             |   |                           | 59,316    |   |   |   | 59,316 |   |
| Accrued                  employee benefits                                                                                                                                                                                                                                                                     |   |                           | 77,480    |   |   |   | 77,480 |   |
| Loans                  from employees                                                                                                                                                                                                                                                                          |   |                           | 70,000    |   |   |   | 70,000 |   |
| **Total                  current liabilities**                                                                                                                                                                                                                                                                 |   |                           | 2,595,927 |   |   |   | 2,595,927 |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |   |   |
| Series                  A Convertible preferred stock, net of subscription receivable of                  $401,065; par                  value $.001; liquidation preference $.70 per share; 5,000,000                  shares authorized; 2,000,000 and 0 shares issued and                  outstanding |   |                           | 1,039,207 |   |   |   | 1,039,207 |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |   |   |
| Minority                  interest                                                                                                                                                                                                                                                                             |   |                           | 8,619     |   |   |   | 8,619 |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |   |   |
| **Stockholders'                  equity**                                                                                                                                                                                                                                                                      |   |                           |      |   |   |   |   |   |
| Common                  stock: par value $.001; 50,000,000 shares authorized; 9,298,823                  shares                  issued and outstanding                                                                                                                                                        |   |                           | 9,299     |   |   |   | 9,299 |   |
| Additional                  paid in capital                                                                                                                                                                                                                                                                    |   |                           | 1,079,908 |   |   |   | 1,079,908 |   |
| Retained                  earnings                                                                                                                                                                                                                                                                             |   |                           | 481,163   |   |   |   | 735,434 |   |
| Accumulated                  other comprehensive income                                                                                                                                                                                                                                                        |   |                           | 62,240    |   |   |   | 59,771 |   |
| **         Total                  stockholders' equity**                                                                                                                                                                                                          |   |                           | 1,632,610 |   |   |   | 1,884,412 |   |
|                                                                                                                                                                                                                                                                                                           |   |                           |      |   |   |   |   |   |
| **Total                  liabilities and stockholders' equity**                                                                                                                                                                                                                                                |   | $                              | 5,276,363 |   |   | $ | 5,528,165 |   |

----

**SHINECO, INC.**

|                                                                    |   | Three                  months ended September 30, |      |   | Nine                  months ended September 30, |   |
|-------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|--------|--------------------------------------------------|--------|
|                                                                    |   | **Restated**                                      |      |   | Original                                         |   |   | **Restated** |   |   | Original |   |   | **Restated** |   |   | Original |   |
|                                                                    |   | 2005                                              |      |   | 2005                                             |   |   | 2006 |   |   | 2006 |   |   | 2005 |   |   | 2005 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                                |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                     Sales revenues                            |   | $                                                 | 586,595   |   |                                             | $      | 708,807 |   |   | $ | 1,174,522 |   |   | $ | 1,174,522 |   |   | $ | 1,414,319 |   |   | $ | 1,414,319 |   |
|                     Cost of goods sold                        |   |                                              | 311,336   |   |                                             |   | 363,266 |   |   |   | 457,446 |   |   |   | 457,446 |   |   |   | 688,077 |   |   |   | 688,077 |   |
| Gross                  profit                                           |   |                                              | 275,259   |   |                                             |   | 345,541 |   |   |   | 717,076 |   |   |   | 717,076 |   |   |   | 726,242 |   |   |   | 726,242 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  expenses                                     |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                     Other selling expenses                    |   |                                              | 11,134    |   |                                             |   | 65,272 |   |   |   | 107,050 |   |   |   | 107,050 |   |   |   | 77,493 |   |   |   | 77,493 |   |
|                     Other general and administrative expenses |   |                                              | 231,510   |   |                                             |   | 234,947 |   |   |   | 543,294 |   |   |   | 526,884 |   |   |   | 575,179 |   |   |   | 558,769 |   |
| Total                  operating expenses                               |   |                                              | 242,644   |   |                                             |   | 300,219 |   |   |   | 650,344 |   |   |   | 633,934 |   |   |   | 652,672 |   |   |   | 636,262 |   |
|                     Operating income                          |   |                                              | 32,615    |   |                                             |   | 45,322 |   |   |   | 66,732 |   |   |   | 83,142 |   |   |   | 73,570 |   |   |   | 89,980 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  income (expense)                                 |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense                                       |   |                                              | (45,832   | )      |                                             |   | (45,832 | ) |   |   | (73,297 | ) |   |   | (73,297 | ) |   |   | (75,186 | ) |   |   | (75,186 | ) |
| Income                  (loss) on equity investments                    |   |                                              | --        |   |                                             |   | -- |   |   |   | (27,178 | ) |   |   | (27,178 | ) |   |   | -- |   |   |   | -- |   |
| Other                                                                   |   |                                              | (6,770    | )      |                                             |   | (6,770 | ) |   |   | (1,773 | ) |   |   | (1,773 | ) |   |   | (6,219 | ) |   |   | (6,219 | ) |
| Total                  other income (expense)                           |   |                                              | (52,602   | )      |                                             |   | (52,602 | ) |   |   | (102,248 | ) |   |   | (102,248 | ) |   |   | (81,405 | ) |   |   | (81,405 | ) |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                     Income before taxes and minority interest |   |                                              | (19,987   | )      |                                             |   | (7,280 | ) |   |   | (35,516 | ) |   |   | (19,106 | ) |   |   | (7,835 | ) |   |   | 8,575 |   |
|                     Provision for income taxes                |   |                                              | --        |   |                                             |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 1,007 |   |   |   | 1,007 |   |
| Income                  before minority interest                        |   |                                              | (19,987   | )      |                                             |   | (7,280 | ) |   |   | (35,516 | ) |   |   | (19,106 | ) |   |   | (8,842 | ) |   |   | 7,568 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority                  interest in (income)/loss of subsidiaries     |   |                                              | 3,297     |   |                                             |   | 3,297 |   |   |   | 5,980 |   |   |   | 5,980 |   |   |   | 4,272 |   |   |   | 4,272 |   |
| Income                  from continuing operations                      |   |                                              | (16,690   | )      |                                             |   | (3,983 | ) |   |   | (29,536 | ) |   |   | (13,126 | ) |   |   | (4,570 | ) |   |   | 11,840 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (loss) from operations of disposed subsidiaries |   |                                              | 7,237     |   |                                             |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 9,692 |   |   |   | 9,692 |   |
| Net                  income (loss) from discontinued operations         |   |                                              | 7,237     |   |                                             |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 9,692 |   |   |   | 9,692 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  income**                                         |   | $                                                 | (9,453    | )      |                                             | $      | (3,983 | ) |   | $ | (29,536 | ) |   | $ | (13,126 | ) |   | $ | 5,122 |   |   | $ | 21,532 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation adjustment                |   |                                              | 37,683    |   |                                             |   | 37,683 |   |   |   | 8,717 |   |   |   | 8,717 |   |   |   | 37,683 |   |   |   | 37,683 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                  income**                               |   | $                                                 | 28,230    |   |                                             | $      | 33,700 |   |   | $ | (20,819 | ) |   | $ | (4,409 | ) |   | $ | 42,805 |   |   | $ | 59,215 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                  earnings (loss) per common share:**            |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      From continuing operations          |   | $                                                 | (0.00     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.00 | ) |   | $ | (0.00 | ) |   | $ | 0.00 |   |
|                      From discontinued operations        |   | $                                                 | 0.00      |   |                                             | $      | -- |   |   | $ | -- |   |   | $ | -- |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                      From net income                     |   | $                                                 | (0.00     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.00 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  earnings (loss) per common share:**          |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      From continuing operations          |   | $                                                 | (0.00     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.00 | ) |   | $ | (0.00 | ) |   | $ | 0.00 |   |
|                      From discontinued operations        |   | $                                                 | 0.00      |   |                                             | $      | -- |   |   | $ | -- |   |   | $ | -- |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                      From net income                     |   | $                                                 | (0.00     | )      |                                             | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.00 | ) |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                    |   |                                              |      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Denominator                  for basic earnings per share               |   |                                              | 9,298,823 |   |                                             |   | 9,298,823 |   |   |   | 9,298,823 |   |   |   | 9,298,823 |   |   |   | 9,298,823 |   |   |   | 9,298,823 |   |
| Denominator                  for diluted earnings per share             |   |                                              | 9,300,160 |   |                                             |   | 9,300,160 |   |   |   | 9,298,823 |   |   |   | 9,298,823 |   |   |   | 9,300,160 |   |   |   | 9,300,160 |   |

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**SHINECO, INC.**

|                                                                                                                  |   | Nine                  months ended September 30, |     |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|----------|
|                                                                                                                  |   | **Restated**                                     |     |   | Original |   |   | **Restated** |   |   | Original |   |
|                                                                                                                  |   | 2006                                             |     |   | 2006 |   |   | 2005 |   |   | 2005 |   |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |
| **Cash                  flows from operating activities:**                                                            |   |                                             |     |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                           |   | $                                                | (29,536  | ) |   | $ | (13,126 | ) |   | $ | 5,122 |   |   | $ | 21,532 |   |
| Adjustments                  to reconcile net income to net cash used in operations:                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                  and amortization                                                                        |   |                                             | 31,063   |   |   |   | 14,653 |   |   |   | 35,886 |   |   |   | 19,476 |   |
| Minority                  interest                                                                                    |   |                                             | (1,762   | ) |   |   | (1,762 | ) |   |   | (4,639 | ) |   |   | (4,639 | ) |
| Changes                  in operating assets and liabilities:                                                         |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trade                  receivables                                                                                    |   |                                             | 522,895  |   |   |   | 522,895 |   |   |   | (355,209 | ) |   |   | (355,209 | ) |
| Other                  receivables                                                                                    |   |                                             | (57,034  | ) |   |   | (57,034 | ) |   |   | (143,141 | ) |   |   | (143,141 | ) |
| Vendor                  deposits                                                                                      |   |                                             | (807,590 | ) |   |   | (807,590 | ) |   |   | 132,650 |   |   |   | 132,650 |   |
| Prepaid                  expenses                                                                                     |   |                                             | 27,845   |   |   |   | 27,845 |   |   |   | 8,372 |   |   |   | 8,372 |   |
| Inventories                                                                                                           |   |                                             | (187,743 | ) |   |   | (187,743 | ) |   |   | 75,616 |   |   |   | 75,616 |   |
| Trade                  payables                                                                                       |   |                                             | 233,478  |   |   |   | 233,478 |   |   |   | (57,857 | ) |   |   | (57,857 | ) |
| Accrued                  liabilities                                                                                  |   |                                             | 32,912   |   |   |   | 32,912 |   |   |   | 79,214 |   |   |   | 79,214 |   |
| Other                  payables                                                                                       |   |                                             | 77,869   |   |   |   | 77,869 |   |   |   | 1,562,685 |   |   |   | 1,562,685 |   |
| Taxes                  payable                                                                                        |   |                                             | (40,781  | ) |   |   | (40,781 | ) |   |   | (68,654 | ) |   |   | (68,654 | ) |
| Customer                  deposits                                                                                    |   |                                             | (143,648 | ) |   |   | (143,648 | ) |   |   | (372,827 | ) |   |   | (372,827 | ) |
| Accrued                  employee benefits                                                                            |   |                                             | 27,552   |   |   |   | 27,552 |   |   |   | -- |   |   |   | -- |   |
| **                           Net cash used in operations**               |   |                                             | (314,480 | ) |   |   | (314,480 | ) |   |   | 897,218 |   |   |   | 897,218 |   |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Cash                  flows from investing activities:**                                                            |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related                  party receivables                                                                            |   |                                             | 12,599   |   |   |   | 12,599 |   |   |   | 80,902 |   |   |   | 80,902 |   |
| Purchase                  of property and equipment                                                                   |   |                                             | (1,365   | ) |   |   | (1,365 | ) |   |   | (19,841 | ) |   |   | (19,841 | ) |
| **                           Net cash used in investing activities**     |   |                                             | 11,234   |   |   |   | 11,234 |   |   |   | 61,061 |   |   |   | 61,061 |   |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Cash                  flows from financing activities:**                                                            |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related                  party payables                                                                               |   |                                             | 8,786    |   |   |   | 8,786 |   |   |   | (602,015 | ) |   |   | (602,015 | ) |
| Proceeds                  from sale of preferred stock                                                                |   |                                             | 40,272   |   |   |   | 40,272 |   |   |   | -- |   |   |   | -- |   |
| Repayments                  on short-term notes payable                                                               |   |                                             | --       |   |   |   | -- |   |   |   | (321,384 | ) |   |   | (321,384 | ) |
| Proceeds                  from short term loans                                                                       |   |                                             | 25,730   |   |   |   | 25,730 |   |   |   | - |   |   |   | - |   |
| **                           Net cash provided by financing activities** |   |                                             | 74,788   |   |   |   | 74,788 |   |   |   | (923,399 | ) |   |   | (923,399 | ) |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect                  of rate changes on cash                                                                       |   |                                             | 8,717    |   |   |   | 8,717 |   |   |   | 2,015 |   |   |   | 2,015 |   |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                  in cash and cash equivalents                                                                |   |                                             | (219,741 | ) |   |   | (219,741 | ) |   |   | 36,895 |   |   |   | 36,895 |   |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents, beginning of period                                                       |   |                                             | 273,367  |   |   |   | 273,367 |   |   |   | 64,272 |   |   |   | 64,272 |   |
| **Cash                  and cash equivalents, end of period**                                                         |   | $                                                | 53,626   |   |   | $ | 53,626 |   |   | $ | 101,167 |   |   | $ | 101,167 |   |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Supplemental                  disclosures of cash flow information:**                                               |   |                                             |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  paid for interest                                                                               |   | $                                                | 73,297   |   |   | $ | 73,297 |   |   | $ | 76,952 |   |   | $ | 76,952 |   |
| Cash                  paid for income taxes                                                                           |   | $                                                | --       |   |   | $ | -- |   |   | $ | 67,200 |   |   | $ | 67,200 |   |
|                                                                                                                  |   |                                             |     |   |   |   |   |   |   |   |   |   |   |
| **Supplemental                  disclosures of non-cash investing and financing                  activities:**        |   |                                             |     |   |   |   |   |   |   |   |   |   |   |
| Stock                  issued for services                                                                            |   | $                                                | 63,000   |   |   | $ | 63,000 |   |   | $ | -- |   |   | $ | -- |   |
| Inventory                  and intangibles acquired in business combination                                           |   | $                                                | --       |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |

----

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

**BUSINESS        OVERVIEW**

**Results        of Operations for Nine Months Ended September 30, 2006 Compared to September        30,        2005**

----

----

**Results        of Operations for Three Months Ended September 30, 2006 Compared to September        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                                      |

----