10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2019

or

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

For the transition period from ____________ to ____________

Commission File Number: 001-37776

SHINECO, INC.

(Exact name of registrant as specified in its charter)

Delaware	52-2175898
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Room 3106, Building B
#39 East 3rd Ring Middle Road
Chaoyang District

People’s Republic of China 100222

(Address of Principal Executive Offices)

(+86) 10-87227366

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 17(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange
on which registered

As of February 13, 2020, the registrant had 27,333,428 shares of common stock outstanding.

TABLE OF CONTENTS

		Page Number
PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive Income (unaudited)	2
	Condensed Consolidated Statements of Changes in Equity (unaudited)	3
	Condensed Consolidated Statements of Cash Flows (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II. OTHER INFORMATION		51
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
SIGNATURES		53

i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHINECO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			June 30,
	2019			2019
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	42,087,793		$	35,330,676
Accounts receivable, net		9,689,266			9,683,074
Due from related parties		122,734			188,453
Inventories		2,618,043			2,215,559
Advances to suppliers, net		4,316,821			11,833,994
Other current assets		1,771,627			1,710,619
TOTAL CURRENT ASSETS		60,606,284			60,962,375
Property and equipment, net		9,949,225			10,667,730
Land use right, net of accumulated amortization		1,229,692			1,264,309
Investments		6,696,183			6,650,944
Distribution rights		1,059,128			1,074,736
Long-term deposit and other noncurrent assets		100,020			103,864
Right of use assets		3,105,286			-
Prepaid leases		-			2,857,344
Deferred tax assets		326,890			158,171
TOTAL ASSETS	$	83,072,708		$	83,739,473
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term loans	$	1,722,159		$	2,410,147
Accounts payable		155,456			220,119
Advances from customers		6,776			382,091
Due to related parties		495,555			234,500
Other payables and accrued expenses		3,884,148			3,893,027
Operating lease liabilities - current		411,280			-
Taxes payable		3,347,354			3,341,872
TOTAL CURRENT LIABILITIES		10,022,728			10,481,756
Income tax payable - noncurrent portion		625,603			625,603
Operating lease liabilities - non-current		3,132			-
TOTAL LIABILITIES		10,651,463			11,107,359
Commitments and contingencies		-			-
EQUITY:
Common stock; par value $0.001, 100,000,000 shares authorized; 27,333,428 and 22,871,772 shares issued and outstanding at December 31, 2019 and June 30, 2019		27,333			22,872
Additional paid-in capital		27,277,758			24,759,356
Statutory reserve		4,198,107			4,198,107
Retained earnings		45,055,036			46,735,190
Accumulated other comprehensive loss		(5,279,389	)		(4,184,024	)
Total Stockholders’ equity of Shineco, Inc.		71,278,845			71,531,501
Non-controlling interest		1,142,400			1,100,613
TOTAL EQUITY		72,421,245			72,632,114
TOTAL LIABILITIES AND EQUITY	$	83,072,708		$	83,739,473

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

1

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	For the Six Months Ended December 31,						For the Three Months Ended December 31,
	2019			2018			2019		2018
REVENUE	$	14,915,393		$	15,971,013		$	7,868,612	$	8,381,932
COST OF REVENUE
Cost of product and services		10,882,848			11,421,721			5,488,425		5,957,257
Business and sales related tax		27,663			38,286			15,200		24,596
Total cost of revenue		10,910,511			11,460,007			5,503,625		5,981,853
GROSS PROFIT		4,004,882			4,511,006			2,364,987		2,400,079
OPERATING EXPENSES
General and administrative expenses		5,446,957			3,089,931			2,092,314		1,562,745
Selling expenses		195,155			487,181			73,269		289,846
Total operating expenses		5,642,112			3,577,112			2,165,583		1,852,591
INCOME (LOSS) FROM OPERATIONS		(1,637,230	)		933,894			199,404		547,488
OTHER INCOME (EXPENSE)
Income from equity method investments		140,582			288,877			70,683		145,742
Purchase rebate income		-			517,626			-		225,187
Other income		38,457			104,299			48,211		51,730
Interest income (expense), net		(308	)		(10,610	)		2,818		(2,836	)
Total other income		178,731			900,192			121,712		419,823
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		(1,458,499	)		1,834,086			321,116		967,311
PROVISION FOR INCOME TAXES		164,392			444,146			169,175		225,363
NET INCOME (LOSS)		(1,622,891	)		1,389,940			151,941		741,948
Net income attributable to non-controlling interest		57,263			33,236			39,458		18,068
NET INCOME (LOSS) ATTRIBUTABLE TO SHINECO, INC.	$	(1,680,154	)	$	1,356,704		$	112,483	$	723,880
COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$	(1,622,891	)	$	1,389,940		$	151,941	$	741,948
Other comprehensive gain (loss): foreign currency translation gain (loss)		(1,110,841	)		(2,627,235	)		1,747,696		30,097
Total comprehensive income (loss)		(2,733,732	)		(1,237,295	)		1,899,637		772,045
Less: comprehensive income (loss) attributable to non-controlling interest		41,787			(3,643	)		66,147		17,985
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHINECO, INC.	$	(2,775,519	)	$	(1,233,652	)	$	1,833,490	$	754,060
Weighted average number of shares basic and diluted		25,760,163			22,079,624			27,333,428		22,871,772
Basic and diluted earnings (loss) per common share	$	(0.07	)	$	0.06		$	0.00	$	0.03

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

2

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED DECEMBER 31, 2019 AND 2018

												ACCUMULATED
					ADDITIONAL							OTHER			NON-
	COMMON STOCK				PAID-IN		STATUTORY		RETAINED			COMPREHENSIVE			CONTROLLING			TOTAL
	SHARES		AMOUNT		CAPITAL		RESERVE		EARNINGS			LOSS			INTEREST			EQUITY
Balance at June 30, 2018		21,234,072	$	21,234	$	23,171,102	$	4,085,819	$	46,051,289		$	(1,509,212	)	$	1,053,449		$	72,873,681
Stock issuance		1,637,700		1,638		1,588,254		-		-			-			-			1,589,892
Net income for the year		-		-		-		-		1,356,704			-			33,236			1,389,940
Appropriation of statutory reserve		-		-		-		83,523		(83,523	)		-			-			-
Foreign currency translation loss		-		-		-		-		-			(2,590,356	)		(36,879	)		(2,627,235	)
Balance at December 31, 2018		22,871,772	$	22,872	$	24,759,356	$	4,169,342	$	47,324,470		$	(4,099,568	)	$	1,049,806		$	73,226,278
Balance at June 30, 2019		22,871,772	$	22,872	$	24,759,356	$	4,198,107	$	46,735,190		$	(4,184,024	)	$	1,100,613		$	72,632,114
Stock issuance		4,461,656		4,461		2,518,402		-		-			-			-			2,522,863
Net income (loss) for the year		-		-		-		-		(1,680,154	)		-			57,263			(1,622,891	)
Foreign currency translation loss		-		-		-		-		-			(1,095,365	)		(15,476	)		(1,110,841	)
Balance at December 31, 2019		27,333,428	$	27,333	$	27,277,758	$	4,198,107	$	45,055,036		$	(5,279,389	)	$	1,142,400		$	72,421,245

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

3

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018

												ACCUMULATED
					ADDITIONAL							OTHER			NON-
	COMMON STOCK				PAID-IN		STATUTORY		RETAINED			COMPREHENSIVE			CONTROLLING		TOTAL
	SHARES		AMOUNT		CAPITAL		RESERVE		EARNINGS			LOSS			INTEREST		EQUITY
Balance at September 30, 2018		22,871,772	$	22,872	$	24,759,356	$	4,141,955	$	46,627,977		$	(4,129,748	)	$	1,030,360	$	72,452,772
Net income for the year		-		-		-		-		723,880			-			18,068		741,948
Appropriation of statutory reserve		-		-		-		27,387		(27,387	)		-			-		-
Foreign currency translation gain		-		-		-		-		-			30,180			1,378		31,558
Balance at December 31, 2018		22,871,772	$	22,872	$	24,759,356	$	4,169,342	$	47,324,470		$	(4,099,568	)	$	1,049,806	$	73,226,278
Balance at September 30, 2019		27,333,428	$	27,333	$	27,277,758	$	4,198,107	$	44,942,553		$	(7,000,396	)	$	1,076,253	$	70,521,608
Net income for the year		-		-		-		-		112,483			-			39,458		151,941
Foreign currency translation gain		-		-		-		-		-			1,721,007			26,689		1,747,696
Balance at December 31, 2019		27,333,428	$	27,333	$	27,277,758	$	4,198,107	$	45,055,036		$	(5,279,389	)	$	1,142,400	$	72,421,245

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

SHINECO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended December 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,622,891	)	$	1,389,940
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		664,380			326,844
Loss from disposal of property and equipment		59,974			-
Provision for doubtful accounts		2,556,565			964,614
Provision for (Reversal of) inventory reserve		173,948			(38,002	)
Deferred tax benefit		(169,510	)		(23,903	)
Income from equity method investments		(140,582	)		(288,877	)
Value of shares issued to IFG Fund for equity, we subsequently cancelled		-			434,000
Restricted shares issued for management		1,022,661			-
Changes in operating assets and liabilities:
Accounts receivable		(650,613	)		3,486,213
Advances to suppliers		5,305,586			(2,469,378	)
Inventories		(604,780	)		(55,295	)
Other receivables		(740,709	)		369,576
Prepaid expense and other assets		429,782			283,428
Due from related parties		62,427			-
Right of use assets		(102,123	)		-
Prepaid leases		-			229,594
Accounts payable		(60,925	)		(1,305,922	)
Advances from customers		(366,510	)		(10,058	)
Other payables		256,188			584,425
Taxes payable		40,610			239,007
NET CASH PROVIDED BY OPERATING ACTIVITIES		6,113,478			4,116,206
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment		(1,494	)		(87,750	)
Proceeds from disposal of property and equipment		79,233			-
Payment for construction in progress		-			(41,439	)
Advances of loans to third parties		(56,857	)		(396,388	)
Loan advances to related party		-			249,362
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		20,882			(276,215	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans		284,499			988,724
Repayment of short-term loans		(924,621	)		(1,080,811	)
Repayment of other short-term loans		(7,112	)		-
Proceeds from issuance of common stock		1,500,203			1,589,892
Proceeds from (repayments of) advances from related parties		262,132			(7,824	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,115,101			1,489,981
EFFECT OF EXCHANGE RATE CHANGE ON CASH		(492,344	)		(1,156,716	)
NET INCREASE IN CASH		6,757,117			4,173,256
CASH - Beginning of the Period		35,330,676			31,487,053
CASH - End of the Period	$	42,087,793		$	35,660,309
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes	$	139,906		$	339,607
Cash paid for interest	$	58,266		$	58,544
SUPPLEMENTAL NON-CASH OPERATING ACTIVITY:
Right-of-use assets obtained in exchange for operating lease obligations	$	413,009		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Shineco, Inc. (“Shineco” or the “Company”) was incorporated in the State of Delaware on August 20, 1997. The Company is a holding company whose primary purpose is to develop business opportunities in the People’s Republic of China (“PRC” or “China”). 

On December 30, 2004, the Company acquired all of the issued and outstanding shares of Beijing Tenet-Jove Technological Development Co., Ltd. (“Tenet-Jove”), a PRC company, in exchange for restricted shares of the Company’s common stock, and the sole operating business of the Company became that of its subsidiary, Tenet-Jove. Tenet-Jove was incorporated on December 15, 2003 under the laws of China. Consequently, Tenet-Jove became a 100% owned subsidiary of Shineco and was officially granted the status of a Wholly Foreign-Owned Entity (“WFOE”) by Chinese authorities on July 14, 2006. This transaction was accounted for as a recapitalization. Tenet-Jove owns 90% interest of Tianjin Tenet Huatai Technological Development Co., Ltd. (“Tenet Huatai”).

On December 31, 2008, June 11, 2011 and May 24, 2012, Tenet-Jove entered into a series of contractual agreements including an Executive Business Cooperation Agreement, a Timely Reporting Agreement, an Equity Interest Pledge Agreement and Executive Option Agreement (collectively, the “VIE Agreements”), with each one of the following entities, Ankang Longevity Pharmaceutical (Group) Co., Ltd. (“Ankang Longevity Group”), Yantai Zhisheng International Freight Forwarding Co., Ltd. (“Zhisheng Freight”), Yantai Zhisheng International Trade Co., Ltd. (“Zhisheng Trade”), Yantai Mouping District Zhisheng Agricultural Produce Cooperative (“Zhisheng Agricultural”) and Qingdao Zhihesheng Agricultural Produce Services., Ltd. (“Qingdao Zhihesheng”). On February 24, 2014, Tenet-Jove entered into the same series of contractual agreements with Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. (“Zhisheng Bio-Tech”), which was incorporated in 2014. Zhisheng Bio-Tech, Zhisheng Freight, Zhisheng Trade, Zhisheng Agricultural, and Qingdao Zhihesheng are collectively referred to herein as the “Zhisheng Group”.

Pursuant to the VIE Agreements, Tenet-Jove has the exclusive right to provide to the Zhisheng  Group and Ankang Longevity Group consulting services related to their business operations and management. All the above contractual agreements obligate Tenet-Jove to absorb a majority of the risk of loss from the Zhisheng Group and Ankang Longevity Group’s activities and entitle Tenet-Jove to receive a majority of their residual returns. In essence, Tenet-Jove has gained effective control over the Zhisheng Group and Ankang Longevity Group. Therefore, the Zhisheng Group and Ankang Longevity Group are treated as Variable Interest Entities (“VIEs”) under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”. Accordingly, the accounts of these entities are consolidated with those of Tenet-Jove.

Since Shineco is effectively controlled by the majority shareholders of the Zhisheng Group and Ankang Longevity Group, Shineco owns 100% of Tenet-Jove. Accordingly, Shineco, Tenet-Jove, and its VIEs, the Zhisheng Group and Ankang Longevity Group are effectively controlled by the same majority shareholders. Therefore, Shineco, Tenet-Jove and its VIEs are considered under common control. The consolidation of Tenet-Jove and its VIEs into Shineco was accounted for at historical cost and prepared on the basis as if the aforementioned exclusive contractual agreements between Tenet-Jove and its VIEs had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.

On April 19, 2017, Tenet-Jove established Xinjiang Tiankunrunze Biological Engineering Co., Ltd. (“Tiankunrunze”) with registered capital of RMB 50.0 million (US$ 7,262,000) and owns 65% interest of Tiankunrunze. On April 28, 2017, Tiankunrunze established Xinjiang Tianzhuo Technology Development Co., Ltd. (“Tianzhuo”) with registered capital of RMB 10.0 million (US$ 1,450,233). On May 22, 2017, Tiankunrunze established Xinjiang Tianhuihechuang Agriculture Development Co., Ltd. (“Tianhuihechuang”) with registered capital of RMB 10.0 million (US$ 1,452,294). On May 23, 2017, Tiankunrunze established Xinjiang Tianxintongye Biotechnology Development Co., Ltd. (“Tianxintongye”) with registered capital of RMB 10.0 million (US$ 1,451,615). Therefore, Tenet-Jove controls Tiankunrunze and its wholly owned subsidiaries.

6

On May 2, 2017, the Company entered into a Strategic Cooperation Agreement with Beijing Zhongke Biorefinery Engineering Technology Co., Ltd. (“Biorefinery”), a leading high-tech biomass refining company financially backed by the Chinese Academy of Sciences Institute of Process Engineering, to establish the Institute of Chinese Apocynum Industrial Technology Research (“ICAITR”). Pursuant to the Strategic Cooperation Agreement the two parties agreed to establish the ICAITR, the Company and Biorefinery own 80% and 20% of the equity interests of ICAITR, respectively. Shineco invested RMB 5.0 million (US$ 737,745) as the registered capital, and Biorefinery will invest a technology patent named “Steam Explosion Degumming”.

On September 30, 2017, Tenet-Jove established Xinjiang Shineco Taihe Agriculture Technology Ltd. (“Xinjiang Taihe”) with registered capital of RMB 10.0 million (US$ 1,502,650). On September 30, 2017, Tenet-Jove established Xinjiang Tianyi Runze Bioengineering Co., Ltd. (“Runze”) with registered capital of RMB 10.0 million (US$ 1,502,650). Xinjiang Taihe and Runze became wholly-owned subsidiaries of Tenet-Jove.

On December 10, 2016, Tenet-Jove entered into a purchase agreement with Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), an online e-commerce company based in Tianjin, China, specializing in distributing Luobuma related products and branded products of Daiso 100-yen shops, pursuant to which Tenet-Jove would acquire a 51% equity interest in Tianjin Tajite for cash consideration of RMB 14,000,000 (approximately US$ 2.1 million). On December 25, 2016, the Company paid the full amount as the deposit to secure the deal. In May, 2017, the Company amended the agreement that required Tianjin Tajite to satisfy certain preconditions related to product introductions into China. On October 26, 2017, the Company completed the acquisition for 51% of the shares in Tianjin Tajite.

On October 27, 2017, the Company, through its subsidiary Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), obtained contractual rights to distribute branded products of Daiso Industries Co., Ltd. (“Daiso”), a large franchise of 100-yen shops founded in Japan, via JD.com (“JD”), one of the largest e-commerce companies and one of the largest retailers in China. On November 3, 2017, the Company further developed the cooperation with Daiso by entering into a supply and purchase agreement (the “Daiso Agreement”) for the purpose of establishing a continuous supply and sale of Daiso’s products in China. Pursuant to the Daiso Agreement, the Company planned to purchase Daiso Products in the amount of approximately RMB 20 million by August, 2018 and add orders as circumstance requires. The term of the Daiso Agreement is for one year, and it renews for an additional one-year at the end of each term unless terminated by written notice by either Tianjin Tajite or Daiso. Due to the policy of China Customs, many of the bestselling products of Daiso are not allowed to be imported through the general form of trade model, but only through cross-border e-commence business model. As a result, the Company and Daiso agreed to suspend the cooperation temporarily and wait for the opening of the China-Japan-South Korea Free Trade Zone.

On November 1, 2017, the Company established an Apocynum Industrial Park in Xinjiang, China. The industrial park is focusing on planting and purchasing Bluish Dogbane, processing and distributing Bluish Dogbane preliminary products.

On March 13, 2019, Tenet-Jove established Beijing Tenjove Newhemp Biotechnology Co., Ltd. (“TNB”) with registered capital of RMB 10.0 million (US$ 1,502,650). TNB became a wholly-owned subsidiary of Tenet-Jove. 

The business operation of Tiankunrunze and its wholly owned subsidiaries was ceased in July 2019. 

On August 22, 2019, Tenet-Jove established Shineco Zhong Hemp Group Co., Ltd. (“Zhong Hemp”) with registered capital of RMB 200.0 million (US$ 28,237,022) and owns 60% interest of Zhong Hemp.

The Company, its subsidiaries, its VIEs and its VIEs’ subsidiaries (collectively the “Group”) operate three main business segments: 1) Tenet-Jove is engaged in manufacturing and selling of Bluish Dogbane and related products, also known in Chinese as “Luobuma”, including therapeutic clothing and textile products made from Luobuma; 2) Zhisheng Group is engaged in the business of planting, processing and distributing of green agricultural produce as well as providing domestic and international logistic services for agricultural products (“Agricultural Products”); and, 3) Ankang Longevity Group manufactures traditional Chinese medicinal herbal products as well as other retail pharmaceutical products. These different business activities and products can potentially be integrated and benefit from one another.

7

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information pursuant to the rules of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2019, which was filed on September 27, 2019.

The unaudited condensed consolidated financial statements of the Company reflect the principal activities of the Company, its subsidiaries, its VIEs and its VIEs’ subsidiaries. The non-controlling interest represents the minority shareholders’ interest in the Company’s majority owned subsidiaries and VIEs. All intercompany accounts and transactions have been eliminated in consolidation.

Consolidation of Variable Interest Entities

VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The carrying amount of the VIEs and their subsidiaries’ consolidated assets and liabilities are as follows:

	December 31, 2019			June 30, 2019
Current assets	$	57,539,496		$	57,328,097
Plant and equipment, net		8,562,202			8,965,671
Other non-current assets		11,382,612			11,028,775
Total assets		77,484,310			77,322,543
Total liabilities		(5,301,117	)		(6,090,955	)
Net assets	$	72,183,193		$	71,231,588

Non-controlling Interests

US GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet. In addition, the amounts attributable to the non-controlling interests in the net income (loss) of these entities are reported separately in the unaudited condensed consolidated statements of income and comprehensive income.

8

Risks and Uncertainties

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environment in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among other factors, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, changes could affect the Company’s interest in these entities and its operations in the PRC.

Members of the current management team own controlling interests in the Company and are also the owners of the VIEs in the PRC. The Company only controls the VIEs through contractual arrangements which obligate it to absorb the risk of loss and to receive the residual expected returns. As such, the controlling shareholders of the Company and the VIEs could cancel these agreements or permit them to expire at the end of the agreement terms, as a result of which the Company would not retain control of the VIEs. In addition, should these agreements be challenged or litigated, they would also be subject to the laws and courts of the PRC legal system which could make enforcing the Company’s rights difficult.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting periods. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant, and equipment, and intangible assets, the recoverability of long-lived assets and the valuation of accounts receivable, deferred taxes and inventory reserves. Actual results could differ from those estimates.

Revenue Recognition

The Company previously recognized revenue from sales of Luobuma products, Chinese medicinal herbal products and agricultural products, as well as providing logistic services and other processing services to external customers. The Company recognized revenue when all of the following have occurred: (i) there was persuasive evidence of an arrangement with a customer; (ii) delivery had occurred or services had been rendered; (iii) the sales price was fixed or determinable; and (iv) the Company’s collection of such fees was reasonably assured. These criteria, as related to the Company’s revenue, were considered to have been met as follows:

Sales of products: The Company recognized revenue from the sale of products when the goods were delivered and title to the goods passed to the customer provided that there were no uncertainties regarding customer acceptance; persuasive evidence of an arrangement existed; the sales price was fixed or determinable; and collectability was deemed probable.

Revenue from the rendering of services: Revenue from international freight forwarding, domestic air and overland freight forwarding services was recognized upon the performance of services as stipulated in the underlying contract or when commodities were being released from the customer’s warehouse; the service price was fixed or determinable; and collectability was deemed probable.

9

With the adoption of ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company adopted the new revenue standard beginning July 1, 2018, and adopted a modified retrospective approach upon adoption. The Company believes that its previous revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company’s contracts. There is no significant impact upon adoption of the new guidance.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, cash on deposit and other highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased. The Company maintains cash with various financial institutions mainly in the PRC. As of December 31, 2019 and June 30, 2019, the Company had no cash equivalents.

Under PRC law, it is generally required that a commercial bank in the PRC that holds third party cash deposits protect the depositors’ rights over and interests in their deposited money. PRC banks are subject to a series of risk control regulatory standards, and PRC bank regulatory authorities are empowered to take over the operation and management of any PRC bank that faces a material credit crisis. The Company monitors the banks utilized and has not experienced any problems. 

Accounts Receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as necessary. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customers’ historical payment history, their current credit-worthiness and current economic trends. The fair value of long-term receivables is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date. As of December 31, 2019 and June 30, 2019, the allowance for doubtful accounts was US$ 4,769,928 and US$ 4,323,141, respectively. Accounts are written off against the allowance after efforts at collection prove unsuccessful.

Inventories

Inventories, which are stated at the lower of cost or net realizable value, consist of raw materials, work-in-progress, and finished goods related to the Company’s products. Cost is determined using the first in first out (“FIFO”) method.  Agricultural products that the Company farms are recorded at cost, which includes direct costs such as seed selection, fertilizer, labor cost and contract fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of prepayments of farmland leases and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to the harvested crops costs when they are sold. The Company periodically evaluates its inventory and records an inventory reserve for certain inventories that may not be saleable or whose cost exceeds net realizable value.

Advances to Suppliers

Advances to suppliers consist of payments to suppliers for materials that have not been received. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. As of December 31, 2019 and June 30, 2019, the Company had an allowance for uncollectible advances to suppliers of US$ 2,417,959 and US$ 431,646, respectively.

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Business Acquisitions

Business acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity, and recognize and measure goodwill or a bargain gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values on the date acquired and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value of the net assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than twelve months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requires the Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a business combination.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). 

Leases 

The Company adopted ASU 2016-02, “Leases” on July 1, 2019 and used the alternative transition approach which permits the effects of adoption to be applied at the effective date. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease exemption and combining the lease and non-lease components practical expedients. The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s balance sheet for office space operating leases. Upon adoption, the Company recognized additional operating liabilities of approximately US$ 0.4 million, with corresponding ROU assets of US$ 3.2 million based on the present value of the remaining rental payments under current leasing standards for existing operating leases. There was no cumulative effect of adopting the standard.  

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Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for additions, major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value, if any, over an asset’s estimated useful life. Farmland leasehold improvements are amortized over the shorter of lease term or estimated useful lives of the underlying assets. The estimated useful lives of the Company’s property and equipment are as follows:

	Estimated useful lives
Buildings	20-50 years
Machinery equipment	5-10 years
Motor vehicles	5-10 years
Office equipment	5-10 years
Farmland leasehold improvements	12-18 years

Land Use Rights

According to Chinese laws and regulations regarding land use rights, land in urban districts is owned by the State, while land in the rural areas and suburban areas, except otherwise provided for by the State, is collectively owned by individuals designated as resident farmers by the State. In accordance with the legal principle that land ownership is separate from the right to the use of the land, the government grants individuals and companies the rights to use parcels of land for a specified period of time. Land use rights, which are usually prepaid, are stated at cost less accumulated amortization. Amortization is provided over the life of the land use rights, using the straight-line method. The useful life is 50 years, based on the term of the land use rights.

Long-lived Assets

Finite-lived assets and intangibles are reviewed for impairment testing when circumstances require. For purposes of evaluating the recoverability of long-lived assets, when undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. The long-lived assets of the Company that are subject to evaluation consist primarily of property, plant and equipment, land use rights, investments and long-term prepaid leases. For the six and three months ended December 31, 2019 and 2018, the Company did not recognize any impairment of its long-lived assets.

Fair Value of Financial Instruments

The Company follows the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs, other than quoted prices in level,  that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the asset or liability.

The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

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Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This ASC also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not have any uncertain tax positions at December 31, 2019 and June 30, 2019. The Company has not provided deferred taxes for undistributed earnings of non-U.S. subsidiaries at December 31, 2019, as it is the Company’s policy to indefinitely reinvest these earnings in non-U.S. operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable.

The statute of limitations for the Company’s U.S. federal income tax returns and certain state income tax returns remains open for tax year 2015 and thereafter. As of December 31, 2019, the tax years ended December 31, 2014 through December 31, 2019 for the Company’s People’s Republic of China (“PRC”) subsidiaries remain open for statutory examination by PRC tax authorities.

On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of The Act, the U.S. corporate tax rate decreased from 35% to 21%. As the Company has a June 30 fiscal year end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ended June 30, 2018, and 21% for subsequent fiscal years. Additionally, The Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to re-measure the Company’s income tax liability and record an estimated income tax expense of US$ 744,766 for the year ended June 30, 2018. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of the Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2019 when the analysis is complete. The Company elects to pay the transition tax over an eight-year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).

Value Added Tax

Sales revenue represents the invoiced value of goods, net of a Value-Added Tax (“VAT”). Before May 1, 2018, all of the Company’s products that were sold in the PRC were subject to a Chinese value-added tax at a rate of 17% of the gross sales price. After May 1, 2018, the Company subject a tax rate of 16%, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law. This VAT may be offset by VAT paid by the Company is on raw materials and other materials included in the cost of producing finished products or acquiring finished products. The Company records a VAT payable or VAT receivable in the accompanying unaudited condensed consolidated financial statements. 

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Foreign Currency Translation

The Company uses the United States dollar (“U.S. dollars”, “USD” or “US$”) for financial reporting purposes. The Company’s subsidiaries and VIEs maintain their books and records in their functional currency of Renminbi (“RMB”), the currency of the PRC. 

In general, for consolidation purposes, the Company translates the assets and liabilities of its subsidiaries and VIEs into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statements of income and cash flows are translated at average exchange rates during the reporting periods. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the financial statements of the subsidiaries and VIEs are recorded as accumulated other comprehensive income (loss).

The balance sheet amounts, with the exception of equity, at December 31, 2019 and June 30, 2019 were translated at 1 RMB to 0.1435 USD and at 1 RMB to 0.1456 USD, respectively. The average translation rates applied to the income and cash flow statement amounts for the six months ended December 31, 2019 and 2018 were at 1 RMB to 0.1422 USD and at 1 RMB to 0.1454 USD, respectively. The average translation rates applied to income and cash flow statement amounts for the three months ended December 31, 2019 and 2018 were at 1 RMB to 0.1420 USD and at 1 RMB to 0.1446 USD, respectively.

Comprehensive Income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to USD is reported in other comprehensive income (loss) in the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss). 

Equity Investment

An investment in which the Company has the ability to exercise significant influence, but does not have a controlling interest, is accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the Board of Directors, voting rights and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate.

Earnings per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., outstanding convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There is no anti-dilutive effect for the six and three months ended December 31, 2019 and 2018.

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New Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to Accounting Standards Codification (“ASC”) 718 upon vesting which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, policies for timing of transfers between different levels for fair value measurements, and the valuation processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company expects that the adoption of this ASU will not have a material impact on its financial statements

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” (ASU 2018-15), to align the requirements for capitalizing implementation costs in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs relating to internal-use software. The update requires entities in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset and which costs to expense. ASU 2018-15 is effective for the Corporation on January 1, 2020 and may be applied using either the retrospective or prospective approach. Early adoption is permitted. The Company expects that the adoption of this ASU will have a material impact on its financial statements. 

In October 2018, the FASB issued ASU No. 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities”. The new standard changes how entities evaluate decision-making fees under the variable interest entity guidance. The new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance. The standard should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption. The Company expects that the adoption of this ASU will not have a material impact on its financial statements. 

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In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Accounting Standard Codification (“ASC”) 842, Leases. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In November 2019, the FASB issued ASU No. 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The guidance identifies, evaluates, and improves areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided. The amendments in that Update expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. For entities that have adopted the amendments in Update 2018-07, the updated guidance is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal 2021. Early adoption is permitted. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The specific areas of potential simplification in this Update were submitted by stakeholders as part of the Simplification Initiative. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

The Company believes that other recent accounting pronouncement updates will not have a material effect on the Company’s condensed unaudited consolidated financial statements.

NOTE 3 - INVENTORIES

The inventories consist of the following:

	December 31, 2019			June 30, 2019
Raw materials	$	609,963		$	974,639
Work-in-process		1,177,110			651,769
Finished goods		1,936,918			1,533,318
Less: inventory reserve		(1,105,948	)		(944,167	)
Total	$	2,618,043		$	2,215,559

Work-in-process includes direct costs such as seed selection, fertilizer, labor cost and subcontractor fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of the prepayment of the farmland lease fees and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to harvested crop costs when they are sold.

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NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

	December 31, 2019			June 30, 2019
Buildings	$	11,693,729		$	11,994,407
Building improvements		-			79,628
Machinery and equipment		873,174			930,109
Motor vehicles		47,320			81,541
Construction in progress		-			78,407
Office equipment		235,834			219,605
Farmland leasehold improvements		3,017,935			3,062,410
		15,867,992			16,446,107
Less: accumulated depreciation and amortization		(5,918,767	)		(5,778,377	)
Property and equipment, net	$	9,949,225		$	10,667,730

Depreciation and amortization expense charged to operations was US$ 419,958 and US$ 307,772 for the six months ended December 31, 2019 and 2018, respectively. Depreciation and amortization expense charged to operations was US$ 241,743 and US$ 120,920 for the three months ended December 31, 2019 and 2018, respectively.  

Farmland leasehold improvements consist of following:

	December 31, 2019		June 30, 2019
Blueberry farmland leasehold improvements	$	2,318,512	$	2,352,679
Yew tree planting base reconstruction		259,759		263,587
Greenhouse renovation		439,664		446,144
Total farmland leasehold improvements	$	3,017,935	$	3,062,410

NOTE 5 - LAND USE RIGHTS

Land use rights are recognized at cost less accumulated amortization. According to the Chinese laws and regulations regarding land use rights, land in urban districts is owned by the State, while land in the rural areas and suburban areas, except otherwise provided for by the State, is collectively owned by individuals designated as resident farmers by the State. However, in accordance with the legal principle that land ownership is separate from the right to the use of the land, the government grants the user a “land use right” (the “Right”) to use the land. The Company has the Right to use the land for 50 years and amortizes the rights on a straight-line basis over the period of 50 years. 

	December 31, 2019			June 30, 2019
Land use rights	$	1,596,295		$	1,619,820
Less: accumulated amortization		(366,603	)		(355,511	)
Land use rights, net	$	1,229,692		$	1,264,309

For the six months ended December 31, 2019 and 2018, the Company recognized amortization expense of US$ 18,427 and US$ 19,072, respectively. For the three months ended December 31, 2019 and 2018, the Company recognized amortization expense of US$ 9,213 and US$ 9,434, respectively.

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The estimated future amortization expenses are as follows:

Twelve months ending December 31:
2020	$	31,926
2021		31,926
2022		31,926
2023		31,926
2024		31,926
Thereafter		1,070,062
Total	$	1,229,692

NOTE 6 - DISTRIBUTION RIGHTS

The Company acquired distribution rights to distribute branded products of Daiso 100-yen shops through the acquisition of Tianjin Tajite. As this distribution right is difficult to acquire and will contribute significant revenue to Tianjin Tajite, such distribution rights were identified and valued as an intangible asset in the acquisition of Tianjin Tajite. The distribution rights, which have no expiration date, have been determined to have an indefinite life. Since the distribution rights have an indefinite life, the Company will evaluate them for impairment at least annually or earlier if determined necessary. As of December 31, 2019, the distribution rights were evaluated at RMB 7,380,000 (US$ 1,059,128). 

NOTE 7 - INVESTMENTS

Ankang Longevity Group entered into two equity investment agreements with Shaanxi Pharmaceutical Group Pai’ang Medicine Co. Ltd. (“Shaanxi Pharmaceutical Group”), a Chinese state-owned pharmaceutical enterprise to invest a total of RMB 6.8 million (approximately US$ 1.0 million) for a 49% equity interest in a pharmacy retail company called Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and a 49% equity interest in a pharmaceutical wholesale distribution company named Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). These two equity investments were formed as new business entities to collaborate with Shaanxi Pharmaceutical Group to expand sales to regional hospitals and clinics and to establish the presence of retail pharmacies under the Brand name “Sunsimiao”. The investments are accounted for using the equity method because Ankang Longevity Group has significant influence, but no control of these two entities. Ankang Longevity Group recorded income of US$ 140,582 and US$ 288,877 for the six months ended December 31, 2019 and 2018, respectively and recorded income of US$ 70,683 and US$ 145,742 for the three months ended December 31, 2019 and 2018, respectively, from the investments, which was included in “Income from equity method investments” in the unaudited condensed consolidated statements of income and comprehensive income (see Note 11).

Ankang Longevity Group entered into a supplemental agreement with Shaanxi Pharmaceutical Group. According to the supplemental agreement, new 49% equity investment companies established by Shaanxi Pharmaceutical Group and Ankang Longevity Group are required to exclusively purchase certain raw materials and drug products from Shaanxi Pharmaceutical Group. In return, Shaanxi Pharmaceutical Group has agreed to compensate Ankang Longevity Group with a purchase rebate of 7% of the total purchases made from Shaanxi Pharmaceutical Group. For the six months ended December 31, 2019 and 2018, a total of US$ Nil and US$ 517,626 was recognized by Ankang Longevity Group from this supplemental agreement in addition to its 49% share of the income from the equity investment companies, respectively. For the three months ended December 31, 2019, total income of US$ Nil was recognized by Ankang Longevity Group from this supplemental agreement, compared to US$ 225,187 in the same period in 2018.

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On October 21, 2013, the Company, through its controlled subsidiaries, Zhisheng Freight and Zhisheng Agricultural, entered into an agreement with an unrelated third party, Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd. (“Zhen’Ai Network”), and invested RMB 14.5 million (approximately US$ 2.2 million) into Tiancang Systematic Warehousing project (“Tiancang Project”) operated by Zhen’Ai Network. The Tiancang Project is an online platform established to provide comprehensive warehousing and logistic solutions to companies involved in E-commerce. The Company is entitled to 29% of Tiancang Project’s after-tax net income annually, less 30% statutory reserve and a 10 % employee welfare fund contribution. When the amount of the accumulated statutory reserve reaches 30% of the total investment for the Tiancang Project, no additional appropriation to the statutory reserve is required. For the six and three months ended December 31, 2019 and 2018, the Company did not record investment income from this investment.

On November 21, 2016, the Company (the “Investor”) entered into an agreement with Original Lab Inc., a California corporation (the “Investee”), and made a payment of US$ 200,000 in exchange for the right to acquire certain shares of the Investee’s common and preferred stock. The Company considered it’s unlikely to obtain any investment income in the near future, and decided the make a fully impairment on this investment during the year ended June 30, 2019. 

The Company’s investments in unconsolidated entities consist of the following:

	December 31, 2019		June 30, 2019
Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (Ankang Longevity Pharmacy)	$	3,774,388	$	3,717,277
Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Chain Co., Ltd.		840,853		822,058
Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd.		2,080,942		2,111,609
Total	$	6,696,183	$	6,650,944

Summarized financial information of unconsolidated entities is as follows:

	December 31, 2019		June 30, 2019
Current assets	$	38,714,700	$	35,675,858
Noncurrent assets		220,420		241,580
Current liabilities		29,531,039		26,668,485

	For the six months ended December 31,
	2019		2018
Net sales	$	16,283,932	$	16,306,851
Gross profit		1,674,366		2,020,501
Income from operations		287,432		665,455
Net income		286,902		589,545

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NOTE 8 - LEASES

Effective July 1, 2019, the Company adopted the new lease accounting standard using the optional transition method which allowed us to continue to apply the guidance under the lease standard in effect at the time in the comparative periods presented. In addition, the Company elected the package of practical expedients, which allowed us to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company has also elected the practical expedient allowing us to not separate the lease and non-lease components for all classes of underlying assets. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities of $3,587,788 and $450,123, respectively, as of July 1, 2019 with no impact on accumulated deficit. Financial position for reporting periods beginning on or after July 1, 2019, are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance.

The Company leases offices space under non-cancelable operating leases, with terms ranging from one to three years. In addition, one of the Company’s controlled subsidiaries, Zhisheng Group entered into several farmland lease contracts with farmer cooperatives to lease farmland in order to plant and grow organic vegetables, fruit and Chinese yew trees. The lease terms vary from 5 years to 24 years. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term. Leases with initial term of 12 months or less are not recorded on the balance sheet. 

When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The table below presents the operating lease related assets and liabilities recorded on the balance sheets. 

	December 31, 2019
Rights of use lease assets	$	3,105,286
		-
Operating lease liabilities – current	$	411,280
Operating lease liabilities – non-current		3,132
Total operating lease liabilities	$	414,412

The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of December 31, 2019:

	December 31, 2019
Remaining lease term and discount rate:
Weighted average remaining lease term (years)		9.74
Weighted average discount rate		5.0	%

Rent expense totaled US$ 201,328 and US$ 295,460 for the six months ended December 31, 2019 and 2018, respectively. Rent expense totaled US$ 109,003 and US$ 136,109 for the three months ended December 31, 2019 and 2018, respectively.

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The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2019:

2020	$	735,163
2021		310,101
2022		209,689
2023		209,163
2024		209,163
Thereafter		1,439,177
Total lease payments		3,112,456
Less: imputed interest		(7,170	)
Less: prepayments		(2,690,874	)
Present value of lease liabilities	$	414,412

NOTE 9 - SHORT-TERM LOANS

Short-term loans consist of the following:

Lender	December 31, 2019		Maturity Date	Int. Rate/Year
Agricultural Bank of China-c		1,435,132	2020-2-25		5.66	%
Agricultural Bank of China-c		287,027	2020-8-26		5.60	%
Total	$	1,722,159

Lender	June 30, 2019		Maturity Date		Int. Rate/Year
MY Bank-a		7,282	2019-8-29	*		15.80	%
Agricultural Bank of China-b		291,256	2019-8-12	*		5.66	%
Agricultural Bank of China-b		655,327	2019-11-13			3.92	%
Agricultural Bank of China-c		1,456,282	2020-2-25			5.66	%
Total	$	2,410,147

The loans outstanding were guaranteed by the following properties, entities or individuals: 

a. Not collateralized or guaranteed.

b. Guaranteed by a commercial credit guaranty company, unrelated to the Company and also by Jiping Chen, a shareholder of the Company.

c. Collateralized by the building owned by Xiaoyan Chen and Jing Chen, who are both related parties of the Company. Xiaoyan Chen is one of the shareholders of Ankang Longevity Group. Jing Chen is the sister of the Xiaoyan Chen but not a shareholder of Ankang Longevity Group.

* The Company repaid the loan in full on maturity date.

The Company recorded interest expense of US$ 58,266 and US$ 58,544 for the six months ended December 31, 2019 and 2018, respectively. The annual weighted average interest rates are 5.32% and 5.74% for the six months ended December 31, 2019 and 2018, respectively.

The Company recorded interest expense of US$ 27,989 and US$ 27,172 for the three months ended December 31, 2019 and 2018, respectively. The annual weighted average interest rates are 5.52% and 5.77% for the three months ended December 31, 2019 and 2018, respectively.

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NOTE 10 - ACQUISITION

On December 12, 2016, the Company entered into a merger and acquisition agreement with Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), a professional e-commerce company distributing Luobuma fabric commodities and branded products of Daiso 100-yen shops, based in Tianjin, China, to acquire a 51 % equity interest of Tianjin Tajite.

Pursuant to the agreement, the Company made a payment of RMB 14,000,000 (approximately US$ 2.1 million) at the end of December, 2016 as the total consideration for the acquisition of Tianjin Tajite.

On October 26, 2017, the Company completed the acquisition of Tianjin Tajite. The acquisition provides a unique opportunity for the Company to enter the market of Luobuma fabric commodities and branded products of Daiso 100-yen shops.

The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.

As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.

The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:

Accounts receivable, net		26,635
Inventory		57,275
Other current assets		182,056
Distribution rights		1,059,128
Property, plant and equipment		13,865
Advance from customers		(77,127	)
Tax payable		(16,648	)
Deferred tax liabilities		(264,782	)
Salary payable		(24,755	)
Accrued liabilities and other current liabilities		(980,277	)
Non-controlling interest		1,406
Goodwill		2,010,649
Total purchase price for acquisition, net of US$ 21,761 of cash	$	1,987,425

The excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill. The results of operations of Tianjin Tajite have been included in the unaudited condensed consolidated statements of operations from the date of acquisition.

In June 2018, the management performed evaluation on the impairment of goodwill. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded an impairment loss on goodwill of Tianjin Tajite.  

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The fair value of distribution rights and its estimated useful lives is as follows:

	Preliminary Fair Value		Weighted Average Useful Life (in Years)
Distribution rights	$	1,059,128	(a)

(a) The distribution rights with no expiration date has been determined to have an indefinite life.

Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were nil in the six months ended December 31, 2019.

NOTE 11 - RELATED PARTY TRANSACTIONS

DUE FROM RELATED PARTIES

The Company had previously made temporary advances to certain shareholders of the Company and to other entities that are either owned by family members of those shareholders or to other entities that the Company has investments in. Those advances are due on demand, non-interest bearing.

As of December 31, 2019 and June 30, 2019, the outstanding amounts due from related parties consist of the following:

	December 31, 2019		June 30, 2019
Yang Bin	$	43,054	$	43,688
Beijing Huiyinansheng Asset Management Co., Ltd (a.)		21,556		21,873
Beijing Shengguang Tianyi Clothing Co., Ltd (b.)		-		63,911
Wang Qiwei		58,124		58,981
	$	122,734	$	188,453

a. This Company is wholly owned by one of the Company’s senior management.

b. This Company is wholly owned by one of the Company’s shareholders.

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DUE TO RELATED PARTIES

As of December 31, 2019 and June 30, 2019, the Company had related party payables of US$ 495,555 and US$ 234,500, respectively, mainly due to the principal shareholders or certain relatives of the shareholders of the Company who lend funds for the Company’s operations. The payables are unsecured, non-interest bearing and due on demand.

	December 31, 2019		June 30, 2019
Wu Yang	$	91,920	$	93,275
Wang Sai		8,611		8,738
Chen Jiping		-		989
Zhang Yuying		-		2,913
Zhou Guocong		11,481		-
Li Baolin		215,270		-
Zhao Min		168,273		128,585
	$	495,555	$	234,500

SALES TO RELATED PARTIES

For the six and three months ended December 31, 2019, the Company recorded sales to Shaanxi Pharmaceutical Group, a related party (see Note 7), of US$ 1,545,849 and US$ 750,301, respectively. For the six and three months ended December 31, 2018, the Company recorded sales to Shaanxi Pharmaceutical Group, a related party, of US$ 1,801,787 and US$ 998,877, respectively. As of December 31, 2019 and June 30, 2019, the balance of accounts receivable due from Shaanxi Pharmaceutical Group was US$ 2,054,466 and US$ 2,706,111, respectively.

NOTE 12 - TAXES

(a) Corporate Income Taxes

The Company is subject to income taxes on an entity basis on income arising in or derived from the location in which each entity is domiciled.

Shineco is incorporated in the United States and has no operating activities. Tenet-Jove and its VIEs entities are governed by the Income Tax Laws of the PRC, and are currently subject to tax at a statutory rate of 25% on taxable income. Two VIE entities and Xinjiang Taihe receive a full income tax exemption from the local tax authority of the PRC as agricultural enterprises as long as the favorable tax policy remains unchanged.

On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted, The Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to re-measure the Company’s income tax liability and record an estimated income tax expense of US$ 744,766 for the year ended June 30, 2018. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of the Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2019 when the analysis is complete. The Company elects to pay the transition tax over an eight year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).

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i) The components of the income tax expense (benefit) are as follows:

	For the six months ended December 31,						For the three months ended December 31,
	2019			2018			2019			2019
Current income tax provision	$	333,902		$	468,049		$	193,061		$	250,893
Deferred income tax benefit		(169,510	)		(23,903	)		(23,886	)		(25,530	)
Total	$	164,392		$	444,146		$	169,175		$	225,363

ii) The following table summarizes deferred tax assets resulting from differences between the financial reporting basis and tax basis of assets and liabilities:

	December 31, 2019			June 30, 2019
Deferred tax assets:
Allowance for doubtful accounts	$	322,480		$	197,962
Inventory reserve		269,192			228,893
Net operating loss carry-forwards		512,124			519,671
Total		1,103,796			946,526
Valuation allowance		(512,124	)		(519,671	)
Total deferred tax assets		591,672			426,855
Deferred tax liability:
Distribution rights		(264,782	)		(268,684	)
Total deferred tax liability		(264,782	)		(268,684	)
Deferred tax assets, net	$	326,890		$	158,171

Movement of the valuation allowance:

	December 31, 2019			June 30, 2018
Beginning balance	$	519,671		$	539,061
Current year addition		-			-
Exchange difference		(7,547	)		(19,390	)
Ending balance	$	512,124		$	519,671

(b) Value Added Tax

The Company is subject to a value added tax (“VAT”) for selling merchandise. The applicable VAT rate is 17% before May 1, 2018 for products sold in the PRC and decreased to 16% thereafter, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under commercial practice in the PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued.

In the event that the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty based on the amount of the taxes which are determined to be late or deficient, and will be expensed in the period if and when a determination is made by the tax authorities. There were no assessed penalties during the six and three months ended December 31, 2019 and 2018.

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(c) Taxes Payable

Taxes payable consists of the following:

	December 31, 2019		June 30, 2019
Income tax payable	$	3,422,879	$	3,425,080
Value added tax payable		542,600		536,486
Business tax and other taxes payable		7,478		5,909
Total		3,972,957		3,967,475
Less: current portion		3,347,354		3,341,872
Income tax payable - noncurrent portion	$	625,603	$	625,603

NOTE 13 - SHAREHOLDERS’ EQUITY

Initial Public Offering

On September 28, 2016, the Company completed its initial public offering of 1,713,190 shares of common stock at a price of US$ 4.50 per share for gross proceeds of US$ 7.7 million and net proceeds of approximately US$ 5.4 million. The Company’s common shares began trading on September 28, 2016 on the NASDAQ Capital Market under the symbol “TYHT.” 

Statutory Reserve

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. As of December 31, 2019 and June 30, 2019, the balance of the required statutory reserves was US$ 4,198,107 and US$ 4,198,107, respectively.

On January 23, 2018, Shineco, Inc. entered into a Common Stock Purchase Agreement (“Purchase Agreement”) with IFG Opportunity Fund LLC (“IFG Fund”) whereby, upon the terms and subject to the conditions and limitations set forth therein, the Company had the right, from time to time in its sole discretion during the 24-month term of the Purchase Agreement, to direct IFG Fund to purchase up to a total of US$ 15,000,000 worth of shares of common stock. As consideration for IFG Fund to enter into the Purchase Agreement, the Company agreed to issue 200,000 shares of the Company’s Common Stock (the “Commitment Shares”) to IFG Fund. The Purchase Shares are being offered in an indirect primary offering consisting of an equity line of credit, in accordance with the terms and conditions of the Purchase Agreement. The total number of Purchase Shares shall not exceed 4,000,000. On January 23, 2018, the Company issued the Commitment Shares to IFG Fund. On July 3, 2018, the Company and IFG Fund entered into a termination agreement, dated July 3, 2018 (the “Termination Agreement”) effective as of July 3, 2018, to terminate the Purchase Agreement and the Registration Rights Agreement. IFG retained the 200,000 commitment shares which were valued at US$ 434,000 and written off during the six months ended September 30, 2018.

On September 27, 2018, the Company entered into a securities purchase agreement with selected investors whereby the Company agreed to sell up to 1,637,700 of common stock at a purchase price of US$ 1 per share, for gross proceeds to the Company of approximately US$ 1,637,700 (the “2018 Offering”). After deducting the offering cost, the net proceeds the Company received was US$ 1,589,892. The 2018 Offering closed on September 28, 2018. The 2018 Offering was made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.

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On May 8, 2019, TNB, filed with the United States Securities and Exchange Commission a Notice of Exempt Offering of Securities on Form D regarding an offering (“Offering”) of simple agreement for future tokens. Tenet-Jove intends to use the net proceeds from sales of the tokens to develop land and facilities for cultivating industrial hemp in China under a newly formed wholly owned subsidiary (the “Operations”). The minimum target amount in this private placement is $1,000,000. Once Shineco raises $1,000,000, investors will have the option to convert smart contracts that represent preferred stock into Shinceo’s common stock. For this, smart contracts that shall be convertible into common stock at the following ratio of 20:1. If Shineco raises $1,000,000 in this private placement, then up to 500,000 shares of common stock will be issued pursuant to the following calculation if the smart contract holders choose to convert their smart contracts that represent preferred stock into Shinceo’s common stock:

1. Each smart contract is $ 0.1;

2. $1,000,000 can get 10,000,000 smart contracts. ($1,000,000 divided by 0.1 equals to 10,000,000 smart contracts.)

3. The conversion ratio of smart contracts to common stock is 20:1

4. Therefore,-10,000,000-smart-contracts-divided by 20 -equals-500,000-common stock.

Shineco plans to issue no more than 4,000,000 shares in connection with this transaction, specifically for the exchange of smart contracts.

On September 3, 2019, the Company granted 1,662,864 restricted shares to its employees as compensation cost for awards. The fair value of the restricted shares was US$ 1,022,661 based on the closing stock price US$ 0.615 at September 3, 2019. These restricted shares were vested immediately from the grant date. 

On September 5, 2019, the Company entered into a securities purchase agreement with select investors whereby the Company agreed to sell, and the investors agreed to purchase, up to 2,798,792 shares of common stock (the “Shares”) at a purchase price of US$ 0.52 per Share. The net proceeds that the Company received was US$ 1,500,203. The offering is being made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.

NOTE 14 - CONCENTRATIONS AND RISKS

The Company maintains principally all bank accounts in the PRC. The cash balance held in the PRC bank accounts was US$ 42,070,119 and US$ 35,311,106 as of December 31, 2019 and June 30, 2019, respectively.

During the six months ended December 31, 2019 and 2018, almost 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from its subsidiaries and VIEs located in the PRC.

For the six months ended December 31, 2019, four customers accounted for approximately 13%, 11%, 10% and 10% of the Company’s total sales, respectively. For the three months ended December 31, 2019, four customers accounted for approximately 12%, 10%, 10% and 10% of the Company’s total sales, respectively. At December 31, 2019, five customers accounted for approximately 70% of the Company’s accounts receivable.

For the six months ended December 31, 2018, five customers accounted for approximately 14%, 11%, 11%, 11% and 11% of the Company’s total sales, respectively. For the three months ended December 31, 2018, two customers accounted for approximately 15% and 12% of the Company’s total sales, respectively.

For the six months ended December 31, 2019, two vendors accounted for approximately 41% and 14% of the Company’s total purchases, respectively. For the six months ended December 31, 2018, three vendors accounted for approximately 45%, 15% and 10% of the Company’s total purchases, respectively.

For the three months ended December 31, 2019, two vendor accounted for approximately 45% and 13% of the Company’s total purchases, respectively. For the three months ended December 31, 2018, one vendor accounted for approximately 28% of the Company’s total purchases, respectively.

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NOTE 15 - COMMITMENTS AND CONTIGENCIES

Lease Commitments

The Company sublets the above-mentioned farmland to a third party under a non-cancelable operating lease agreement through May 31, 2020. The future minimum sublease rental income to be received is as follows: 

Twelve months ending December 31:
2020	$	85,350
Total	$	85,350

Sublease rental income totaled US$ 102,420 and US$ 104,688 for the six months ended December 31, 2019 and 2018, respectively.

Sublease rental income totaled US$ 51,111 and US$ 51,784 for the three months ended December 31, 2019 and 2018, respectively.

Legal Contingencies

On May 16, 2017, Bonwick Capital Partners, LLC (“Plaintiff”) commenced a lawsuit (Case No. 1:17-cv-03681-PGG) against the Company in the United States District Court for the Southern District of New York. Plaintiff alleges that the Company entered into an agreement with Plaintiff (the “Agreement”), pursuant to which Plaintiff was to provide the Company with financial advisory services in connection with the Company’s initial public offering in the United States. Plaintiff alleges that the Company breached the Agreement and seeks money damages up to US$ 6 million. The Company believes that these claims are without merit and intends to vigorously defend its position.

NOTE 16 - SEGMENT REPORTING

ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Group’s internal organizational management structure as well as information about geographical areas, business segments and major customers in for details on the Group’s business segments.

The Company’s chief operating decision maker has been identified as the Chief Executive Officer who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Group. Based on management’s assessment, the Company has determined that it has three operating segments according to its major products and locations as follows:

● Developing, manufacturing and distributing of specialized fabrics, textile products and other by-products derived from an indigenous Chinese plant called Apocynum Venetum, commonly known as “Bluish Dogbane” or known in Chinese as “Luobuma” (referred to herein as Luobuma):

The operating companies of this segment, namely Tenet-Jove and Tenet Huatai, specialize in Luobuma growing, development and manufacturing of relevant products, as well as purchasing Luobuma raw materials processing.

This segment’s operations are focused in the north region of Mainland China, mostly carried out in Beijing, Tianjin and Xinjiang City.

● Processing and distributing of traditional Chinese medicinal herbal products as well as other pharmaceutical products (“Herbal products”):

The operating companies of this segment, namely AnKang Longevity Group and its subsidiaries, process more than 600 kinds of Chinese medicinal herbal products with an established domestic sales and distribution network.

Ankang Longevity Group is also engaged in the retail pharmacy business and the operating revenue, which is not material, is also included in this segment.

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● Planting, processing and distributing of green and organic agricultural produce as well as growing and cultivating of Chinese Yew trees (“Other agricultural products”):

The operating companies of this segment, the Zhisheng Group, is engaged in the business of growing and distributing green and organic vegetables and fruits as well as providing logistics services for distributing agricultural products. This segment has been focusing its efforts on the growing and cultivating of Chinese yew trees (formally known as “taxus media”), a small evergreen tree whose branches can be used for the production of medications believed to be anti-cancer and the tree itself can be used as an ornamental indoor bonsai tree, which are known to have the effect of purifying air quality.

The operations of this segment are located in the East and North regions of Mainland China, mostly carried out in Shandong Province and in Beijing where the Zhisheng Group has newly developed over 100 acres of modern greenhouses for cultivating yew trees and other plants.

The following table presents summarized information by segment for the six months ended December 31, 2019: 

	For the six months ended December 31, 2019
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	138,759		$	6,839,600		$	7,937,034		$	14,915,393
Cost of revenue and related business and sales tax		269,157			5,227,120			5,414,234			10,910,511
Gross profit		(130,398	)		1,612,480			2,522,800			4,004,882
Gross profit %		(94.0	)%		23.6	%		31.8	%		26.9	%

The following table presents summarized information by segment for the six months ended December 31, 2018:

	For the six months ended December 31, 2018
	Bluish			Herbal			Other agricultural
	dogbane			products			products			Total
Segment revenue	$	510,724		$	6,797,904		$	8,662,385		$	15,971,013
Cost of revenue and related business and sales tax		221,786			5,154,956			6,083,265			11,460,007
Gross profit		288,938			1,642,948			2,579,120			4,511,006
Gross profit %		56.6	%		24.2	%		29.8	%		28.2	%

The following table presents summarized information by segment for the three months ended December 31, 2019: 

	For the three months ended December 31, 2019
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	73,240		$	3,539,279		$	4,256,093		$	7,868,612
Cost of revenue and related business and sales tax		37,653			2,627,716			2,838,256			5,503,625
Gross profit		35,587			911,563			1,417,837			2,364,987
Gross profit %		48.6	%		25.8	%		33.3	%		30.1	%

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The following table presents summarized information by segment for the three months ended December 31, 2018: 

	For the three months ended December 31, 2018
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	344,539		$	3,499,581		$	4,537,812		$	8,381,932
Cost of revenue and related business and sales tax		167,357			2,580,690			3,233,806			5,981,853
Gross profit		177,182			918,891			1,304,006			2,400,079
Gross profit %		51.4	%		26.3	%		28.7	%		28.6	%

Total Assets as of

	December 31, 2019		June 30, 2019
Luobuma products	$	4,971,200	$	6,268,974
Herbal products		46,125,282		45,095,019
Other agricultural products		31,976,226		32,375,480
	$	83,072,708	$	83,739,473

NOTE 17 - SUBSEQUENT EVENTS

These unaudited condensed consolidated financial statements were approved by management and available for issuance on February XX, 2019, and the Company has evaluated subsequent events through this date. No subsequent events required adjustments to or disclosure in these unaudited condensed consolidated financial statements. 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain statements of a forward-looking nature. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.

Examples of forward-looking statements include:

● the timing of the development of future products;

● projections of revenue, earnings, capital structure and other financial items;

● statements of our plans and objectives, including those that relate to our proposed expansions and the effect such expansions may have on our revenues;

● statements regarding the capabilities of our business operations;

● statements of expected future economic performance;

● statements regarding competition in our market; and

● assumptions underlying statements regarding us or our business.

The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We discuss our known material risks under the heading “Risk Factors” in our annual report on Form 10-K and Registration Statement on Form S-1. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update is incorrect or create an obligation to provide any other updates.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of our operations and financial condition for six months and three months ended December 31, 2019 and 2018 should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Report and our annual report on Form 10-K for the twelve months ended June 30, 2019 and 2018, including the consolidated financial statements and notes thereto. All monetary figures are presented in U.S. dollars, unless otherwise indicated.

Forward-Looking Statements

The statements in this discussion that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the “safe harbor” created by those sections The words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “continue,” the negative forms thereof, or similar expressions, are intended to identify forward-looking statements, although not all forward-looking statements are identified by those words or expressions. Forward-looking statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control. Actual results, performance or achievements may differ materially from those expressed or implied by forward-looking statements depending on a variety of important factors, including, but not limited to, weather, local, regional, national and global Luobuma and herbal medicines price fluctuations, availability of financing and interest rates, competition, changes in, or failure to comply with, government regulations, costs, uncertainties and other effects of legal and other administrative proceedings, and other risks and uncertainties. Actual results and the timing of the events may differ materially from those contained in these forward looking statements due to many factors, including those discussed in the “Forward-Looking Statements” set forth elsewhere in this quarterly report on Form 10-Q. We are not undertaking to update or revise any forward-looking statement, whether as a result of new information, future events or circumstances or otherwise.

Business Overview and Corporate Structure

Shineco, Inc. (the “Company”, “we”, “us” and “our”) was incorporated in the State of Delaware on August 20, 1997. On December 30, 2004, the Company acquired all of the issued and outstanding shares of Beijing Tenet-Jove Technological Development Co., Ltd. (“Tenet-Jove”), a PRC company, in exchange for our restricted shares of common stock. Consequently, Tenet-Jove became our 100% owned subsidiary and its operating business became that of the Company. Tenet-Jove was incorporated on December 15, 2003 under the laws of China and was officially granted the status of a Wholly Foreign-Owned Entity (“WFOE”) by Chinese authorities on July 14, 2006. This transaction was accounted for as a recapitalization. Tenet-Jove owns a 90% interest of Tianjin Tenet Huatai Technological Development Co., Ltd. (“Tenet Huatai”).

On December 31, 2008, June 11, 2011 and May 24, 2012, Tenet-Jove entered into a series of contractual agreements including an Executive Business Cooperation Agreement, a Timely Reporting Agreement, an Equity Interest Pledge Agreement and Executive Option Agreement (collectively, the “VIE Agreements”), with each one of the following entities, Ankang Longevity Pharmaceutical (Group) Co., Ltd. (“Ankang Longevity Group”), Yantai Zhisheng International Freight Forwarding Co., Ltd. (“Zhisheng Freight”), Yantai Zhisheng International Trade Co., Ltd. (“Zhisheng Trade”), Yantai Mouping District Zhisheng Agricultural Produce Cooperative (“Zhisheng Agricultural”) and Qingdao Zhihesheng Agricultural Produce Services., Ltd. (“Qingdao Zhihesheng”). On February 24, 2014, Tenet-Jove entered into the same series of contractual agreements with Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. (“Zhisheng Bio-Tech”), which was incorporated in 2014. Zhisheng Bio-Tech, Zhisheng Freight, Zhisheng Trade, Zhisheng Agricultural, and Qingdao Zhihesheng are collectively referred to herein as the “Zhisheng Group.”  Zhisheng Agricultural has not had any significant business activities and thus we have deregistered it in 2017. We have transferred all assets, rights and liabilities to an affiliated entity, Zhisheng Freight.

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Pursuant to the VIE Agreements, Tenet-Jove has the exclusive right to provide to each of the Zhisheng Group entities and Ankang Longevity Group consulting services related to their business operations and management. All these contractual agreements obligate Tenet-Jove to absorb a majority of the risk of loss from each of the Zhisheng Group entities and Ankang Longevity Group’s activities and entitle Tenet-Jove to receive a majority of their residual returns. In essence, Tenet-Jove has gained effective control over each of the Zhisheng Group and Ankang Longevity Group. Based on these contractual arrangements, the Zhisheng Group and Ankang Longevity Group are treated as Variable Interest Entities (“VIEs”) under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”. Accordingly, the accounts of each of the Zhisheng Group entities and Ankang Longevity Group are consolidated with those of Tenet-Jove. Ankang Longevity Group has several subsidiaries. We carry out all of our business in China through our PRC subsidiaries, our VIEs and their subsidiaries.

On April 19, 2017, Tenet-Jove established Xinjiang Tiankunrunze Biological Engineering Co., Ltd. (“Tiankunrunze”) with registered capital of RMB 50.0 million (US$ 7,262,000) and owns 65% interest of Tiankunrunze. On April 28, 2017, Tiankunrunze established Xinjiang Tianzhuo Technology Development Co., Ltd. (“Tianzhuo”) with registered capital of RMB 10.0 million (US$ 1,450,233). On May 22, 2017, Tiankunrunze established Xinjiang Tianhuihechuang Agriculture Development Co., Ltd. (“Tianhuihechuang”) with registered capital of RMB 10.0 million (US$ 1,452,294). On May 23, 2017, Tiankunrunze established Xinjiang Tianxintongye Biotechnology Development Co., Ltd. (“Tianxintongye”) with registered capital of RMB 10.0 million (US$ 1,451,615). Therefore, Tenet-Jove controls Tiankunrunze and its wholly owned subsidiaries.

On May 2, 2017, the Company entered into a Strategic Cooperation Agreement with Beijing Zhongke Biorefinery Engineering Technology Co., Ltd. (“Biorefinery”), a leading high-tech biomass refining company financially backed by the Chinese Academy of Sciences Institute of Process Engineering, to establish the Institute of Chinese Apocynum Industrial Technology Research (“ICAITR”). Pursuant to the Strategic Cooperation Agreement the two parties agreed to establish the ICAITR, the Company and Biorefinery own 80% and 20%  of the equity interests of ICAITR, respectively. Shineco invested RMB 5.0 million (US$ 737,745) as the registered capital, and Biorefinery will invest a technology patent for “Steam Explosion Degumming”.

On September 21, 2017, the Company, through its wholly owned subsidiary Tenet-Jove, entered into a Strategic Cooperation Agreement (the “Agreement”) with Mr. Jianjun Wang, who is experienced in apocynum planting, manufacturing and knowledgeable in apocynum market and administration procedures with relevant authorities in apocynum industry in China, to establish an Apocynum Industrial Park in Xinjiang, China. Pursuant to the Agreement entered into on September 21, 2017, both parties have agreed to establish a new company, namely, Xinjiang Shineco Taihe Agriculture Technology Ltd. to hold and operate the Apocynum Industrial Park, with a total investment of RMB 50 million (approximately US$ 7.57 million), of which the Company will invest RMB 47.5 million and Mr. Wang will invest RMB 2.5 million. Upon the closing of the Agreement, Shineco owns 95% of the equity interest of Xinjiang Taihe.

On September 30, 2017, Tenet-Jove established Xinjiang Shineco Taihe Agriculture Technology Ltd. (“Xinjiang Taihe”) with registered capital of RMB 10.0 million (US$ 1,502,650). On September 30, 2017, Tenet-Jove established Xinjiang Tianyi Runze Bioengineering Co., Ltd. (“Runze”) with registered capital of RMB 10.0 million (US$ 1,502,650). Xinjiang Taihe and Runze became wholly-owned subsidiaries of Tenet-Jove.

On December 10, 2016, Tenet-Jove entered into a purchase agreement with Tianjin Tajite, an online e-commerce company based in Tianjin, China, specializing in distributing Luobuma related products and branded products of Daiso 100-yen shops, pursuant to which Tenet-Jove would acquire a 51% equity interest in Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), a professional e-commerce company distributing Luobuma fabric commodities and branded products of Daiso 100-yen shops, based in Tianjin, China, for cash consideration of RMB 14,000,000 (approximately US$ 2.1 million). On December 25, 2016, the Company paid the full amount as the deposit to secure the deal. In May, 2017, the Company amended the agreement that required Tianjin Tajite to satisfy certain preconditions related to product introductions into China. On October 26, 2017, the Company completed the acquisition for 51% of the equity interest in Tianjin Tajite.

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On October 27, 2017, the Company, through its subsidiary Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), obtained contractual rights to distribute branded products of Daiso Industries Co., Ltd. (“Daiso”), a large franchise of 100-yen shops founded in Japan, via JD.com (“JD”), one of the largest e-commerce companies and one of the largest retailers in China. On November 3, 2017, the Company further developed the cooperation with Daiso by entering into a supply and purchase agreement (the “Daiso Agreement”) for the purpose of establishing a continuous supply and sale of Daiso’s products in China. Pursuant to the Daiso Agreement, the Company planned to purchase Daiso Products in the amount of approximately RMB 20 million by August, 2018 and add orders as circumstance requires. The term of the Daiso Agreement is for one year, and it renews for an additional one-year at the end of each term unless terminated by written notice by either Tianjin Tajite or Daiso. Due to the policy of China Customs, many of the bestselling products of Daiso are not allowed to be imported through the general form of trade model, but only through cross-border e-commence business model. As a result, the Company and Daiso agreed to suspend the cooperation temporarily and waits for the opening of the China-Japan-South Korea Free Trade Zone.

On November 1, 2017, the Company established the Apocynum Industrial Park in Xinjiang, China.

We ceased the business operation of Tenet-Jove Xuzhou branch in November 2017.

On March 13, 2019, Tenet-Jove established Beijing Tenjove Newhemp Biotechnology Co., Ltd. (“TNB”) with registered capital of RMB 10.0 million (US$ 1,502,650). TNB became wholly-owned subsidiaries of the Company. 

We ceased the business operation of Tiankunrunze and its wholly owned subsidiaries in July 2019. 

On August 22, 2019, Tenet-Jove established Shineco Zhong Hemp Group Co., Ltd. (“Zhong Hemp”) with registered capital of RMB 200.0 million (US$ 28,237,022) and owns 60% interest of Zhong Hemp.

The Company, through its subsidiary, Xinjiang Taihe has entered into a definitive Share Exchange and Acquisition Agreement (the “Xinjiang Tiansheng Agreement”) with Western Xinjiang Tiansheng Agricultural Development Co., Ltd (“Xinjiang Tiansheng”). Pursuant to the Xinjiang Tiansheng Agreement, Xinjiang Taihe will receive 51% equity ownership in Xinjiang Tiansheng for further investment in apocynum business expansion in Xinjiang, China, in exchange for a combination of 14% equity ownership in Xinjiang Taihe and cash payments in three separate installments (the “Acquisition Consideration”). The first installment in the amount of RMB 810,000 (approximately US$ 117,933) was paid to Xinjiang Tiansheng (the “Xinjiang Tiansheng Deposit”). The Acquisition Consideration in the aggregate is valued at RMB 23.8 million (approximately US$ 3.5 million) contingent upon certain milestones in the next years. The Company and Xinjiang Tiansheng terminated the Xinjiang Tiansheng Agreement on July 10, 2018 and Xinjiang Tiansheng returned the full Xinjiang Tiansheng Deposit following such termination by the end of July 2018. 

Currently, we have three main business segments: (i) Tenet-Jove is engaged in developing, manufacturing and selling of Bluish Dogbane and related products, also known in Chinese as “Luobuma,” including therapeutic clothing and textile products made from Luobuma, as well as purchasing Luoboma raw materials processing; (ii) Zhisheng Group is engaged in the business of planting, processing and distributing of green agricultural produce as well as providing domestic and international logistic services for agricultural products (“Agricultural Products”); and, (iii) Ankang Longevity manufactures traditional Chinese medicinal herbal products as well as other retail pharmaceutical products. These different business activities and products can potentially be integrated and benefit from one another.

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Financing Activities

On January 23, 2018, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with IFG OPPORTUNITY FUND LLC (“IFG Fund”) whereby, the Company had  the right, from time to time in its sole discretion during the 24-month term of the Purchase Agreement, to direct IFG Fund to purchase up to a total of US$ 15,000,000 of shares of Common Stock and an additional 200,000 shares of Common Stock (the “Commitment Shares”) as consideration for IFG to enter into the Purchase Agreement. The Company and IFG Fund, on January 23, 2018, entered into a Registration Rights Agreement for certain registration rights in connection with the Purchase Agreement (the “Registration Rights Agreement”). The IFG Fund offering was made pursuant to a prospectus supplement dated and filed with the Securities and Exchange Commission (“SEC”) on January 26, 2018 (the “Prospectus Supplement”) and an accompanying prospectus dated November 21, 2017, under the Company’s shelf registration statement on Form S-3 declared effective by the SEC on December 19, 2017 (File No. 333-221711) (the “Registration Statement”). On January 23, 2018, the Company issued the Commitment Shares to IFG Fund. On July 3, 2018, the Company and IFG Fund entered into a termination agreement, dated July 3, 2018 (the “Termination Agreement”) effective as of July 3, 2018, to terminate the Purchase Agreement and the Registration Rights Agreement. IFG retained the 200,000 commitment shares which were valued at US$ 434,000 and written off during the six months ended September 30, 2018. 

On September 27, 2018, the Company entered into a securities purchase agreement with selected investors whereby the Company agreed to sell up to 1,637,700 of common stock at a purchase price of US$ 1 per share, for gross proceeds to the Company of approximately US$ 1,637,700 (the “2018 Offering”). After deducting the offering cost, the net proceeds the Company received was US$ 1,589,892. The 2018 Offering closed on September 28, 2018. The 2018 Offering was made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.

On May 8, 2019, TNB, filed with the United States Securities and Exchange Commission a Notice of Exempt Offering of Securities on Form D regarding an offering (“Offering”) of simple agreement for future tokens. Tenet-Jove intends to use the net proceeds from sales of the tokens to develop land and facilities for cultivating industrial hemp in China under a newly formed wholly owned subsidiary (the “Operations”). The minimum target amount in this private placement is $1,000,000. Once Shineco raises $1,000,000, investors will have the option to convert smart contracts that represent preferred stock into Shinceo’s common stock. For this, smart contracts that shall be convertible into common stock at the following ratio of 20:1. If Shineco raises $1,000,000 in this private placement, then up to 500,000 shares of common stock will be issued pursuant to the following calculation if the smart contract holders choose to convert their smart contracts that represent preferred stock into Shinceo’s common stock:

1. Each smart contract is $ 0.1;

2. $1,000,000 can get 10,000,000 smart contracts. ($1,000,000 divided by 0.1 equals to 10,000,000 smart contracts.)

3. The conversion ratio of smart contracts to common stock is 20:1

4. Therefore,-10,000,000-smart-contracts-divided by 20 -equals-500,000-common stock.

Shineco plans to issue no more than 4,000,000 shares in connection with this transaction, specifically for the exchange of smart contracts.

On September 5, 2019, the Company entered into a securities purchase agreement with select investors whereby the Company agreed to sell, and the investors agreed to purchase, up to 2,798,792 shares of common stock (the “Shares”) at a purchase price of US$ 0.52 per Share. The net proceeds that the Company received was US$ 1,500,203. The offering is being made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder. 

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Factors Affecting Financial Performance

We believe that the following factors will affect our financial performance:

Increasing demand for our products - The increasing demand for our agricultural products will have a positive impact on our financial position. We plan to develop new products and expand our distribution network as well as to grow our business through possible mergers and acquisitions of similar or synergetic businesses, all aimed at increasing awareness of our brand, developing customer loyalty, meeting customer demands in various markets and providing solid foundations for our continuous growth. As of the date of this Report however, we do not have any agreements, undertakings or understandings to acquire any such entities and there can be no guarantee that we ever will.

Expansion of our sources of supply, production capacity and sales network - To meet the increasing demand for our products, we need to expand our sources of supply and production capacity. We plan to make capital improvements in our existing production facilities which would improve both their efficiency and capacity. In the short-run, we intend to increase our investment in our reliable supply network, personnel training, information technology applications and logistic system upgrades. We also participate in two non-equity investment opportunities through a VIE, both of which we expect to provide us with new networks and platforms.

Maintaining effective control of our costs and expenses - Successful cost control depends upon our ability to obtain and maintain adequate material supplies as required by our operations at competitive prices. We will focus on improving our long-term cost control strategies including establishing long-term alliances with certain suppliers to ensure adequate supply is maintained. We will carry forward the economies of scale and advantages from our nationwide distribution network and diversified offerings. Moreover, we will step up our efforts in higher value added products of Luobuma by using an exclusive and patented technology, to optimize quality management, procurement processes and cost control, and give full play to the strong production capacity and trustworthy sales teams to maximize our profit and bring better long-term return for our shareholders.

Economic and Political Risks

Our operations are conducted primarily in the PRC. Accordingly, our business, financial conditions and results may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

Our operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks with, among others, the political, economic and legal environment and foreign currency exchange. Our Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions, remittances abroad, and rates and methods of taxation, among other things.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting period. Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies used in the preparation of our unaudited condensed consolidated financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Report.

Consolidation of Variable Interest Entities

VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting periods. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant, and equipment, and intangible assets, the recoverability of long-lived assets and the valuation of accounts receivable, deferred taxes and inventory reserves. Actual results could differ from those estimates. 

Accounts Receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as necessary. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customers’ historical payment history, their current credit-worthiness and current economic trends. The fair value of long-term receivables is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date. As of December 31, 2019 and June 30, 2019, the allowance for doubtful accounts was US$ 4,769,928 and US$ 4,323,141, respectively. Accounts are written off against the allowance after efforts at collection prove unsuccessful.

Inventories

Inventories, which are stated at the lower of cost or net realizable value, consist of raw materials, work-in-progress, and finished goods related to the Company’s products. Cost is determined using the first in first out (“FIFO”) method. Agricultural products that the Company farms are recorded at cost, which includes direct costs such as seed selection, fertilizer, labor cost and contract fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of prepayments of farmland leases and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to the harvested crops costs when they are sold. The Company periodically evaluates its inventory and records an inventory reserve for certain inventories that may not be saleable or whose cost exceeds net realizable value. 

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Revenue Recognition

The Company previously recognized revenue from sales of Luobuma products, Chinese medicinal herbal products and agricultural products, as well as providing logistic services and other processing services to external customers. The Company recognized revenue when all of the following have occurred: (i) there was persuasive evidence of an arrangement with a customer; (ii) delivery had occurred or services had been rendered; (iii) the sales price was fixed or determinable; and (iv) the Company’s collection of such fees was reasonably assured. These criteria, as related to the Company’s revenue, were considered to have been met as follows:

Sales of products: The Company recognized revenue from the sale of products when the goods were delivered and title to the goods passed to the customer provided that there were no uncertainties regarding customer acceptance; persuasive evidence of an arrangement existed; the sales price was fixed or determinable; and collectability was deemed probable.

Revenue from the rendering of services: Revenue from international freight forwarding, domestic air and overland freight forwarding services was recognized upon the performance of services as stipulated in the underlying contract or when commodities were being released from the customer’s warehouse; the service price was fixed or determinable; and collectability was deemed probable.

With the adoption of ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company adopted the new revenue standard beginning July 1, 2018, and adopted a modified retrospective approach upon adoption. The Company believes that its previous revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company’s contracts. There is no significant impact upon adoption of the new guidance.

Fair Value of Financial Instruments

The Company follows the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs, other than quoted prices in level, that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the asset or liability.

The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

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Results of Operations for the Six Months Ended December 31, 2019 and 2018

Overview

The following table summarizes our results of operations for the six months ended December 31, 2019 and 2018:

	Six Months Ended December 31,						Variance
	2019			2018			Amount			%
Revenue	$	14,915,393		$	15,971,013		$	(1,055,620	)		(6.61	)%
Cost of revenue		10,910,511			11,460,007			(549,496	)		(4.79	)%
Gross profit		4,004,882			4,511,006			(506,124	)		(11.22	)%
General and administrative expenses		5,446,957			3,089,931			2,357,026			76.28	%
Selling expenses		195,155			487,181			(292,026	)		(59.94	)%
Income (loss) from operations		(1,637,230	)		933,894			(2,571,124	)		(275.31	)%
Income from equity method investments		140,582			288,877			(148,295	)		(51.33	)%
Purchase rebate income		-			517,626			(517,626	)		(100.00	)%
Other income		38,457			104,299			(65,842	)		(63.13	)%
Interest expense, net		(308	)		(10,610	)		10,302			(97.10	)%
Income (loss) before income tax provision		(1,458,499	)		1,834,086			(3,292,585	)		(179.52	)%
Provision for income taxes		164,392			444,146			(279,754	)		(62.99	)%
Net income (expense)	$	(1,622,891	)	$	1,389,940		$	(3,012,831	)		(216.76	)%
Comprehensive loss attributable to Shineco Inc.	$	(2,775,519	)	$	(1,233,652	)	$	(1,541,867	)		124.98

Revenue

Currently, we have three revenue streams derived from our three major business segments. First, developing, manufacturing and distributing specialized fabrics, textiles and other by-products derived from an indigenous Chinese plant Apocynum Venetum, known in Chinese as “Luobuma” or “Bluish Dogbane”, as well as Luoboma raw materials processing, this segment is channeled through our wholly owned subsidiary, Tenet-Jove. Second, processing and distributing traditional Chinese medicinal herbal products as well as other pharmaceutical products; this segment is conducted via our VIE, Ankang Longevity Group and its subsidiaries. Third, planting, processing and distributing green and organic agricultural produce as well as growing and cultivation of yew trees; this segment is conducted through our VIEs, the Zhisheng Group. 

The following table sets forth the breakdown of our revenue for each of our three segments, for the six months ended December 31, 2019 and 2018, respectively:

	Six Months Ended December 31,										Variance
	2019		%			2018		%			Amount			%
Luobuma products	$	138,759		0.93	%	$	510,724		3.20	%	$	(371,965	)		(72.83	)%
Chinese medicinal herbal products		6,839,600		45.86	%		6,797,904		42.56	%		41,696			0.61	%
Other agricultural products		7,937,034		53.21	%		8,662,385		54.24	%		(725,351	)		(8.37	)%
Total Amount	$	14,915,393		100.00	%	$	15,971,013		100.00	%	$	(1,055,620	)		(6.61	)%

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For the six months ended December 31, 2019 and 2018, revenue from sales of Luobuma products was US$ 138,759 and US$ 510,724, respectively, which represented a decrease of US$ 371,965 or 72.83%. The decrease of revenue from this segment was mainly due to the decrease in revenue from Tenet-Jove of US$ 302,703. Since the beginning of the year, we did not launch new products, and we mainly focused on clearing off our old stocks, as a result, sales decreased during the six months ended December 31, 2019 as compared to the same period of 2018.

For the six months ended December 31, 2019 and 2018, revenue from sales of Chinese medicinal herbal products was US$ 6,839,600 and US$ 6,797,904, respectively, representing a slight increase of US$ 41,696 or 0.61%. The sales of Chinese medicinal herbal products were comparatively stable during the six months ended December 31, 2019 as compared to the same period in 2018.

For the six months ended December 31, 2019 and 2018, revenue from sales of other agricultural products was US$ 7,937,034 and US$ 8,662,385, respectively, representing a decrease of US$ 725,351 or 8.37%. The decrease was mainly due to the decrease in revenue generated from logistics services as less service orders were received from our customers during the six months ended December 31, 2019 as compared to the same period in 2018.

Cost of Revenue and related tax

The following table sets forth the breakdown of the Company’s cost of revenue for each of our three segments, for the six months ended December 31, 2019 and 2018, respectively:

	Six Months Ended December 31,										Variance
	2019		%			2018		%			Amount			%
Luobuma products	$	268,836		2.46	%	$	218,784		1.92	%	$	50,052			22.88	%
Chinese medicinal herbal products		5,203,807		47.70	%		5,129,906		44.76	%		73,901			1.44	%
Other agricultural products		5,410,205		49.59	%		6,073,031		52.99	%		(662,826	)		(10.91	)%
Business and sales related tax		27,663		0.25	%		38,286		0.33	%		(10,623	)		(27.75	)%
Total Amount	$	10,910,511		100.00	%	$	11,460,007		100.00	%	$	(549,496	)		(4.79	)%

For the six months ended December 31, 2019 and 2018, cost of revenue from sales of our Luobuma products was US$ 268,836 and US$ 218,784, respectively, representing an increase of US$ 50,052 or 22.88%. The increase was mainly due to the increased allowance we accrued for our slow-moving inventories, and the increase was partially offset by the decrease in cost of revenue as we sold less products during the six months ended December 31, 2019.

For the six months ended December 31, 2019 and 2018, cost of revenue from sales of Chinese medicinal herbal products was US$ 5,203,807 and US$ 5,129,906, respectively, representing a slight increase of US$ 73,901 or 1.44%. The percentage of increase in cost of revenue was proportional to the percentage of the increase in sales.  

For the six months ended December 31, 2019 and 2018, cost of revenue from sales of other agricultural products was US$ 5,410,205 and US$ 6,073,031, respectively, representing a decrease of US$ 662,826 or 10.91%. The decrease was mainly due to less logistics services we provided during the six months ended December 31, 2019, as compared to the same period in 2018. The percentage of decrease in cost of revenue was proportional to the percentage of the decrease in sales.

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Gross Profit

The following table sets forth the breakdown of the Company’s gross profit for each of our three segments, for the six months ended December 31, 2019 and 2018, respectively:

	Six Months Ended December 31,											Variance
	2019			%			2018		%			Amount			%
Luobuma products	$	(130,398	)		(3.25	)%	$	288,938		6.41	%	$	(419,336	)		(145.13	)%
Chinese medicinal herbal products		1,612,480			40.26	%		1,642,948		36.42	%		(30,468	)		(1.85	)%
Other agricultural products		2,522,800			62.99	%		2,579,120		57.17	%		(56,320	)		(2.18	)%
Total Amount	$	4,004,882			100.00	%	$	4,511,006		100.00	%	$	(506,124	)		(11.22	)%

Gross profit from Luobuma product sales decreased by US$ 419,336 and gross profit contribution percentage decreased by 145.13% for the six months ended December 31, 2019 as compared to the same period in 2018. During the six months ended December 31, 2019, our negative gross profit was US$ 130,398, it was mainly due to the increased allowance we accrued for our slow-moving inventories amounted to US$ 173,948. In addition, in order to reduce our old stocks, we sold some of our products below their original costs during the six months ended December 31, 2019.

Gross profit from sales of Chinese medicinal herbal products decreased slightly by US$ 30,468 or 1.85% for the six months ended December 31, 2019 as compared to the same period in 2018. The percentage of the variance in gross profit was proportional to the percentage of the variance in revenue due to the stable gross margin of our products.

Gross profit from sales of other agricultural products decreased by US$ 56,320 or 2.18% for the six months ended December 31, 2019 as compared to the same period in 2018. As mentioned above, the decrease was mainly due to less logistics services we provided during the six months ended December 31, 2019 as compared to the same period in 2018. The percentage of the variance in gross profit was proportional to the percentage of the variance in revenue due to the stable gross margin of our products.

Expenses

The following table sets forth the breakdown of our operating expenses for the six months ended December 31, 2019 and 2018, respectively:

	Six Months Ended December 31,										Variance
	2019		%			2018		%			Amount			%
General and administrative expenses	$	5,446,957		96.54	%	$	3,089,931		86.38	%	$	2,357,026			76.28	%
Selling expenses		195,155		3.46	%		487,181		13.62	%		(292,026	)		(59.94	)%
Total Amount	$	5,642,112		100.00	%	$	3,577,112		100.00	%	$	2,065,000			57.73	%

General and Administrative Expenses

For the six months ended December 31, 2019, our general and administrative expenses were US$ 5,446,957, representing an increase of US$ 2,357,026 or 76.28%, as compared to the same period in 2018. The increase in general and administrative expenses was mainly due to an increase in bad debt expense of US$ 1,591,951, an increase in staff salary due to issuance of restricted shares to the management as compensation of US$ 1,022,661, as well as an increased general and administrative expenses of US$ 149,324 for our newly established entity TNB. The increase was partially offset by the decreased offering cost write-off of US$ 434,000. The US$ 434,000 was the valuation of the Commitment Shares retained by IFG Fund upon termination of the Purchase Agreement and Registration Rights Agreement in the six months ended December 31, 2018. 

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Selling Expenses

For the six months ended December 31, 2019, our selling and distribution expenses were US$ 195,155, representing a decrease of US$ 292,026, or 59.94%, as compared to the same period in 2018. The decrease was mainly due to the decrease in advertising expenses of Tenet-Jove of US$ 205,717 as less advertising activities were carried out during the six months ended December 31, 2019 as compared to the same period of 2018. The decrease was also due to the decrease in salary expenses of US$ 57,167 as a result of reduced number of staff during the six months ended December 31, 2019.

Income from Equity Method Investments

We are 49% owners in two equity investment companies with Shaanxi Pharmaceutical Group Pai’ang Medicine Co. Ltd. (“Shaanxi Pharmaceutical Group”): Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). We recorded net income of US$ 140,582 and US$ 288,877 from these equity method investments for the for the six months ended December 31, 2019 and 2018, respectively. The decrease in net income was primarily due to lower net profit in the two 49% equity investment companies in the current period. 

We invested RMB 14.5 million (approximately US$ 2.2 million) into Tiancang Systematic Warehousing project (“Tiancang Project”) operated by Zhen’Ai Network. The Tiancang Project is currently operational. For the six months ended December 31, 2019 and 2018, we did not record investment income from Zhen’Ai Network.

Purchase Rebate Income

We are party to a supplemental agreement with Shaanxi Pharmaceutical Group. According to the supplemental agreement, the participants in the 49% equity investment companies established by Shaanxi Pharmaceutical Group and Ankang Longevity Group are required to purchase certain raw materials and drug products exclusively from Shaanxi Pharmaceutical Group. In return, Shaanxi Pharmaceutical Group has agreed to compensate Ankang Longevity Group with a purchase rebate of 7% of the total purchases made from Shaanxi Pharmaceutical Group. For the six months ended December 31, 2019, no income was recognized by Ankang Longevity Group from this supplemental agreement, compared to US$ 517,626 in the same period in 2018. The management assessed the collectability of the accounts receivable due from Shaanxi Pharmaceutical Group, and determined that the collection could not be reasonably assured. As of December 31, 2019, provision for bad debt was amounted to US$ 1,205,325. Therefore, on a prudent basis, the management did not record any purchase rebate income during the six months ended December 31, 2019. Management will continue putting effort in collection of overdue account receivables from Shaanxi Pharmaceutical Group.

Other Income

For the six months ended December 31, 2019, our other income was US$ 38,457, representing a decrease of US$ 65,842, or 63.13%, as compared to other income of US$ 104,299 in the same period in 2018. The decrease in other income was primarily due to loss from disposal of property and equipment of US$ 62,397 during the six months ended December 31, 2019.

Provision for Income Taxes

For the six months ended December 31, 2019 and 2018, the Company’s provision for income taxes decreased by US$ 279,754 or 62.99% to US$ 164,392 for the six months ended December 31, 2019 from US$ 444,146 for the six months ended December 31, 2018. The decrease in provision for income taxes was mainly due to decreased taxable income of Ankang Longevity Group and increased deferred income tax benefit of Tenet-Jove and Tenet Huatai for the six months ended December 31, 2019.

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Net Income (Loss)

Our net loss was US$ 1,622,891 for six months ended December 31, 2019, an increase of US$ 3,012,831 or 216.76% from net income of US$ 1,389,940 for the six months ended December 31, 2018. The decrease in net income was primarily a result of the decrease in gross profit and purchase rebate income, and the increase in general and administrative expenses, offset by the decrease in selling expenses and provision for income taxes. 

Comprehensive Loss

The comprehensive loss was US$ 2,733,732 for the six months ended December 31, 2019, an increase of US$ 1,496,437 from comprehensive loss of US$ 1,237,295 for the six months ended December 31, 2018. After deduction of non-controlling interest, the comprehensive loss attributable to the Company was US$ 2,775,519 for the six months ended December 31, 2019, compared to comprehensive loss attributable to the Company of US$ 1,233,652 for the six months ended December 31, 2018. The reason of the significant increase of comprehensive loss was due to the decrease in net income as mentioned above.

Results of Operations for the Three Months Ended December 31, 2019 and 2018

Overview

The following table summarizes our results of operations for the three months ended December 31, 2019 and 2018:

	Three Months Ended December 31,					Variance
	2019		2018			Amount			%
Revenue	$	7,868,612	$	8,381,932		$	(513,320	)		(6.12	)%
Cost of revenue		5,503,625		5,981,853			(478,228	)		(7.99	)%
Gross profit		2,364,987		2,400,079			(35,092	)		(1.46	)%
General and administrative expenses		2,092,314		1,562,745			529,569			33.89	%
Selling expenses		73,269		289,846			(216,577	)		(74.72	)%
Income from operations		199,404		547,488			(348,084	)		(63.58	)%
Income from equity method investments		70,683		145,742			(75,059	)		(51.50	)%
Purchase rebate income		-		225,187			(225,187	)		(100.00	)%
Other income		48,211		51,730			(3,519	)		(6.80	)%
Interest income (expense), net		2,818		(2,836	)		5,654			(199.37	)%
Income before income tax provision		321,116		967,311			(646,195	)		(66.80	)%
Provision for income taxes		169,175		225,363			(56,188	)		(24.93	)%
Net income	$	151,941	$	741,948		$	(590,007	)		(79.52	)%
Comprehensive income attributable to Shineco Inc.	$	1,833,490	$	754,060		$	1,079,430			143.15	%

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Revenue

The following table sets forth the breakdown of our revenue for each of our three segments, for the three months ended December 31, 2019 and 2018, respectively:

	Three Months Ended December 31,										Variance
	2019		%			2018		%			Amount			%
Luobuma products	$	73,240		0.93	%	$	344,539		4.10	%	$	(271,299	)		(78.74	)%
Chinese medicinal herbal products		3,539,279		44.98	%		3,499,581		41.75	%		39,698			1.13	%
Other agricultural products		4,256,093		54.09	%		4,537,812		54.15	%		(281,719	)		(6.21	)%
Total Amount	$	7,868,612		100.00	%	$	8,381,932		100.00	%	$	(513,320	)		(6.12	)%

For the three months ended December 31, 2019 and 2018, revenue from sales of Luobuma products was US$ 73,240 and US$ 344,539 respectively, which represented a decrease of US$ 271,299 or 78.74%. The decrease of revenue from this segment was mainly due to the decrease in revenue from Tenet-Jove of US$ 221,086. Since the beginning of the year, we did not launch new products, and we mainly focused on clearing off our old stocks, as a result, sales decreased during the three months ended December 31, 2019 as compared to the same period of 2018.

For the three months ended December 31, 2019 and 2018, revenue from sales of Chinese medicinal herbal products was US$ 3,539,279 and US$ 3,499,581, respectively, representing a slight increase of US$ 39,698 or 1.13%. The sales of Chinese medicinal herbal products were comparatively stable during the three months ended December 31, 2019 as compared to the same period in 2018.

For the three months ended December 31, 2019 and 2018, revenue from sales of other agricultural products was US$ 4,256,093 and US$ 4,537,812, respectively, representing a decrease of US$ 281,719 or 6.21%. The decrease was mainly due to the decrease in revenue generated from logistics services as less service orders were received from our customers during the three months ended December 31, 2019 as compared to the same period in 2018.

Cost of Revenue and related tax

The following table sets forth the breakdown of the Company’s cost of revenue for each of our three segments, for the three months ended December 31, 2019 and 2018, respectively:

	Three Months Ended December 31,										Variance
	2019		%			2018		%			Amount			%
Luobuma products	$	37,455		0.67	%	$	165,189		2.76	%	$	(127,734	)		(77.33	)%
Chinese medicinal herbal products		2,613,877		47.49	%		2,565,400		42.89	%		48,477			1.89	%
Other agricultural products		2,837,093		51.55	%		3,226,668		53.94	%		(389,575	)		(12.07	)%
Business and sales related tax		15,200		0.29	%		24,596		0.41	%		(9,396	)		(38.20	)%
Total Amount	$	5,503,625		100.00	%	$	5,981,853		100.00	%	$	(478,228	)		(7.99	)%

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For the three months ended December 31, 2019 and 2018, cost of revenue from sales of our Luobuma products was US$ 37,455 and US$ 165,189, respectively, representing a decrease of US$ 127,734 or 77.33%. The percentage of decrease in cost of revenue was proportional to the percentage of the decrease in sales.

For the three months ended December 31, 2019 and 2018, cost of revenue from sales of Chinese medicinal herbal products was US$ 2,613,877 and US$ 2,565,400, respectively, representing a slight increase of US$ 48,477 or 1.89%. The percentage of increase in cost of revenue was proportional to the percentage of the increase in sales.  

For the three months ended December 31, 2019 and 2018, cost of revenue from sales of other agricultural products was US$ 2,837,093 and US$ 3,226,668, respectively, representing a decrease of US$ 389,575 or 12.07%. The decrease was mainly due to less logistics services we provided during the three months ended December 31, 2019, as compared to the same period in 2018. The decrease was also due to less labor costs incurred, as we reduced the number of employees in order to save costs during the three months ended December 31, 2019.

Gross Profit

The following table sets forth the breakdown of the Company’s gross profit for each of our three segments, for the three months ended December 31, 2019 and 2018, respectively:

	Three Months Ended December 31,										Variance
	2019		%			2018		%			Amount			%
Luobuma products	$	35,587		1.51	%	$	177,182		7.38	%	$	(141,595	)		(79.92	)%
Chinese medicinal herbal products		911,563		38.54	%		918,891		38.29	%		(7,328	)		(0.80	)%
Other agricultural products		1,417,837		59.95	%		1,304,006		54.33	%		113,831			8.73	%
Total Amount	$	2,364,987		100.00	%	$	2,400,079		100.00	%	$	(35,092	)		(1.46	)%

Gross profit from Luobuma product sales decreased by US$ 141,595 and gross profit contribution percentage decreased by 79.92% for the three months ended December 31, 2019 as compared to the same period in 2018. The percentage of the variance in gross profit was proportional to the percentage of the variance in revenue due to the stable gross margin of our products.

Gross profit from sales of Chinese medicinal herbal products decreased slightly by US$ 7,328 or 0.80% for the three months ended December 31, 2019 as compared to the same period in 2018. The percentage of the variance in gross profit was proportional to the percentage of the variance in revenue due to the stable gross margin of our products.

Gross profit from sales of other agricultural products increased by US$ 113,831 or 8.73% for the three months ended December 31, 2019 as compared to the same period in 2018. As mentioned above, the increase was mainly due to less labor costs incurred. Due to less logistics services orders received from our customers, we reduced the number of employees in order to save costs, as a result, gross profit from sales of other agricultural products increased during the three months ended December 31, 2019.

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Expenses

The following table sets forth the breakdown of our operating expenses for the three months ended December 31, 2019 and 2018, respectively:

	Three Months Ended December 31,										Variance
	2019		%			2018		%			Amount			%
General and administrative expenses	$	2,092,314		96.62	%	$	1,562,745		84.35	%	$	529,569			33.89	%
Selling expenses		73,269		3.38	%		289,846		15.65	%		(216,577	)		(74.72	)%
Total Amount	$	2,165,583		100.00	%	$	1,852,591		100.00	%	$	312,992			16.89	%

General and Administrative Expenses

For the three months ended December 31, 2019, our general and administrative expenses were US$ 2,092,314, representing an increase of US$ 529,569 or 33.89%, as compared to the same period in 2018. The increase in general and administrative expenses was mainly due to an increase in bad debt expense of US$ 470,735 during the three months ended December 31, 2019.

Selling Expenses

For the three months ended December 31, 2019, our selling and distribution expenses were US$ 73,269, representing a decrease of US$ 216,577, or 74.72%, as compared to the same period in 2018. The decrease was mainly due to the decrease in advertising expenses of Tenet-Jove of US$ 146,622 as less advertising activities were carried out during the three months ended December 31, 2019 as compared to the same period of 2018. The decrease was also due to the decrease in salary expenses of US$ 25,404 as a result of reduced number of staff during the three months ended December 31, 2019.

Income from Equity Method Investments

We are 49% owners in two equity investment companies with Shaanxi Pharmaceutical Group Pai’ang Medicine Co. Ltd. (“Shaanxi Pharmaceutical Group”): Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). We recorded net income of US$ 70,683 and US$ 145,742 from these equity method investments for the for the three months ended December 31, 2019 and 2018, respectively. The decrease in net income was primarily due to lower net profit in the two 49% equity investment companies in the current period. 

We invested RMB 14.5 million (approximately US$ 2.2 million) into Tiancang Systematic Warehousing project (“Tiancang Project”) operated by Zhen’Ai Network. The Tiancang Project is currently operational. For the three months ended December 31, 2019 and 2018, we did not record investment income from Zhen’Ai Network.

Purchase Rebate Income

We are party to a supplemental agreement with Shaanxi Pharmaceutical Group. According to the supplemental agreement, the participants in the 49% equity investment companies established by Shaanxi Pharmaceutical Group and Ankang Longevity Group are required to purchase certain raw materials and drug products exclusively from Shaanxi Pharmaceutical Group. In return, Shaanxi Pharmaceutical Group has agreed to compensate Ankang Longevity Group with a purchase rebate of 7% of the total purchases made from Shaanxi Pharmaceutical Group. For the three months ended December 31, 2019, no income was recognized by Ankang Longevity Group from this supplemental agreement, compared to US$ 225,187 in the same period in 2018. The management assessed the collectability of the accounts receivable due from Shaanxi Pharmaceutical Group, and determined that the collection could not be reasonably assured. As of December 31, 2019, provision for bad debt was amounted to US$ 1,205,325. Therefore, on a prudent basis, the management did not record any purchase rebate income during the three months ended December 31, 2019. Management will continue putting effort in collection of overdue account receivables from Shaanxi Pharmaceutical Group.

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Provision for Income Taxes

For the three months ended December 31, 2019 and 2018, the Company’s provision for income taxes decreased by US$ 56,188 or 24.93% to US$ 169,175 for the three months ended December 31, 2019 from US$ 225,363 for the three months ended December 31, 2018. The decrease in provision for income taxes was mainly due to decreased taxable income of Ankang Longevity Group.

Net Income

Our net income was US$ 151,941 for three months ended December 31, 2019, a decreased by US$ 590,007 or 79.52% from net income of US$ 741,948 for the three months ended December 31, 2018. The decrease in net income was primarily a result of the decrease in gross profit and purchase rebate income, and the increase in general and administrative expenses, offset by the decrease in selling expenses and provision for income taxes.

Comprehensive Income

The comprehensive income was US$ 1,899,637 for the three months ended December 31, 2019, an increase of US$ 1,127,592 from comprehensive income of US$ 772,045 for the three months ended December 31, 2018. After deduction of non-controlling interest, the comprehensive income attributable to the Company was US$ 1,833,490 for the three months ended December 31, 2019, compared to comprehensive income attributable to the Company of US$ 754,060 for the three months ended December 31, 2018. The reason of the significant increase of comprehensive income was due to the increase in the recorded income of foreign currency translation where the financial statements denominated in RMB were translated to the USD denomination.

Treasury Policies

We have established treasury policies with the objectives of achieving effective control of treasury operations and of lowering cost of funds. Therefore, funding for all operations and foreign exchange exposure have been centrally reviewed and monitored from the top level. To manage our exposure to fluctuations in exchange rates and interest rates on specific transactions and foreign currency borrowings, currency structured instruments and other appropriate financial instruments will be used to hedge material exposure, if any.

Our policy precludes us from entering into any derivative contracts purely for speculative activities. Through our treasury policies, we aim to:

(a) Minimize interest risk

This is accomplished by loan re-financing and negotiation. We will continue to closely monitor the total loan portfolio and compare the loan margin spread under our existing agreements against the current borrowing interest rates under different currencies and new offers from banks.

(b) Minimize currency risk

In view of the current volatile currency market, we will closely monitor the foreign currency borrowings at the company level. As of December 31, 2019 and June 30, 2019, we do not engage in any foreign currency borrowings or loan contracts.

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Liquidity and Capital Resources

We currently finance our business operations primarily through cash flows from operations and proceeds from our initial public offering, as well as from short-term loans and the sale of our common stock. Our current cash primarily consists of cash on hand and cash in bank, which is unrestricted as to withdrawal and use and is deposited with banks in China. 

On September 28, 2016, we completed the initial public offering of 1,713,190 shares of the Company’s common stock at a price of US$ 4.50 per share for gross proceeds of US$ 7.7 million and net proceeds of approximately US$ 5.4 million.

On September 27, 2018, we entered into a securities purchase agreement with selected investors whereby the Company agreed to sell up to 1,637,700 of common stock at a purchase price of US$ 1 per share, for gross proceeds of US$ 1.6 million and net proceeds of approximately US$ 1.6 million.

On September 5, 2019, we entered into a securities purchase agreement with select investors whereby the Company sold 2,798,792 shares of common stock at a purchase price of US$ 0.52 per share, for the net proceeds of approximately US$ 1.5 million.

Management believes that our current cash, cash flows from current and future operations, and access to loans will be sufficient to meet our working capital needs for at least the next 12 months. We intend to continue to carefully execute our growth plans and manage market risk

Working Capital

The following table provides the information about our working capital at December 31, 2019 and June 30, 2019:

	December 31, 2019		June 30, 2019
Current Assets	$	60,606,284	$	60,962,375
Current Liabilities		10,022,728		10,481,756
Working Capital	$	50,583,556	$	50,480,619

The working capital increased by US$ 102,937 or 0.2% as of December 31, 2019 from June 30, 2019, primarily as a result of an increase in cash and decrease in short-term loans, partially offset by the decrease in advances to suppliers during the six months ended December 31, 2019. We believe that we currently have sufficient working capital to operate our business.

As of December 31, 2019 and June 30, 2019, the other major component of our working capital is accounts receivable. The accounts receivable as of December 31, 2019 were US$ 9,689,266, a slight increase of approximately 0.1% from US$ 9,683,074 as of June 30, 2019. Management will continue putting effort in collection of overdue account receivables from the customers.

Capital Commitments and Contingencies

Capital commitments refer to the allocation of funds for the possible purchase in the near future for fixed assets or investment. Contingency refers to a condition that arises from past transactions or events, the outcome of which will be confirmed only by the occurrence or non-occurrence of uncertain futures events.

As of December 31, 2019 and June 30, 2019, we had no material capital commitments or contingent liabilities.

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Cash Flows

The following table provides detailed information about our net cash flows for the six months ended December 31, 2019 and 2018, respectively:

	For the six months ended December 31,
	2019			2018
Net cash provided by operating activities	$	6,113,478		$	4,116,206
Net cash provided by (used in) investing activities		20,882			(276,215	)
Net cash provided by financing activities		1,115,101			1,489,981
Effect of exchange rate changes on cash		(492,344	)		(1,156,716	)
Net increase in cash		6,757,117			4,173,256
Cash, beginning of period		35,330,676			31,487,053
Cash, end of period	$	42,087,793		$	35,660,309

Operating Activities

Net cash provided by operating activities during the six months ended December 31, 2019 was approximately US$ 6.1 million, consisting of net loss of US$ 1.6 million, bad debt expenses of US$ 2.6 million, restricted shares issued for management of US$ 1.0 million, and net changes in our operating assets and liabilities, which mainly included a decrease in advances to suppliers of US$ 5.3 million, partially offset by the increase in other receivables of US$ 0.7 million. Net cash provided by operating activities during the six months ended December 31, 2018 was approximately US$ 4.1 million, consisting of net income of US$ 1.4 million, bad debt expenses of US$ 1.0 million, of US$ 0.4 million for the value of shares issued to IFG Fund for equity that we subsequently cancelled, and net changes in our operating assets and liabilities, which mainly included a decrease in account receivables of US$ 3.5 million, partially offset by an increase in advances to suppliers of US$ 2.5 million and a decrease in accounts payable of US$ 1.3 million. 

Investing Activities

For the six months ended December 31, 2019, net cash provided by investing activities was approximately US$ 20,882 as compared to net cash used in investing activities of US$ 276,215 for the same period of 2018. The increase in net cash provided by investing activities was primarily due to the proceeds from disposal of property and equipment of US$ 79,233, partially offset by the increase in advance of loans to third parties of US$ 56,857 for the six months ended December 31, 2019, as compared to the same period in 2018. 

Financing Activities

For the six months ended December 31, 2019, net cash provided by financing activities amounted to US$ 1.1 million, primarily due to the proceeds from issuance of common stock of US$ 1.5 million, and proceeds from short-term loans of US$ 0.3 million, partially offset by the repayment of short-term loans of US$ 0.9 million. For the six months ended December 31, 2018, net cash provided by financing activities amounted to US$ 1.5 million, primarily due to the proceeds from issuance of common stock of US$ 1.6 million, and proceeds from short-term loans of US$ 1.0 million, partially offset by the repayment of short-term loans of US$ 1.1 million. 

49

Subsequent Events

Management has evaluated subsequent events for recognition and disclosure through the date these financial statements were filed with the United States Securities and Exchange Commission and concluded that no subsequent event or transactions have occurred that required recognition or disclosure in our consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a small reporting company, we are not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on our review, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this report due to following material weaknesses:

● Lack of full-time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions;

● Lack of segregation of duties for accounting personnel who prepared and reviewed the journal entries.

In order to address the above material weaknesses, our management plans to take the following steps:

● Recruiting sufficient qualified professionals with appropriate levels of knowledge and experience to assist in reviewing and resolving accounting issues in routine or complex transactions. To mitigate the reporting risks, we engaged an outside professional consulting firm to supplement our efforts to improve our internal control over financial reporting;

● Improving the communication between management, board of directors and the Chief Financial Officer; and

● Obtaining proper approval for other significant and non-routine transactions from the Board of Directors.

The Company believes the foregoing measures will remediate the identified material weaknesses in future periods. The Company is committed to monitoring the effectiveness of these measures and making any changes that are necessary and appropriate.   

(b) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during our first fiscal quarter of 2019. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.   

50

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Other than ordinary routine litigation (of which we are not currently involved), we know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation, and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our company except as set forth below:

On May 16, 2017, Bonwick Capital Partners, LLC (“Plaintiff”) commenced a lawsuit (Case No. 1:17-cv-03681-PGG) against the Company in the United States District Court for the Southern District of New York. Plaintiff alleges that the Company entered into an agreement with Plaintiff (the “Agreement”), pursuant to which Plaintiff was to provide the Company with financial advisory services in connection with the Company’s initial public offering in the United States. Plaintiff alleges that the Company breached the Agreement and seeks money damages up to $6 million. The Company believes that these claims are without merit and intends to vigorously defend itself.

ITEM 1A. RISK FACTORS.

As a smaller reporting company, we are not required to provide the information otherwise required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

There have been no unregistered sale of equity securities during the three months ended December 31, 2019.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

51

ITEM 6. EXHIBITS

Number	Exhibit
31.1*	Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350 of Title 18, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350 of Title 18, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

52

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SHINECO, INC.
Dated: February 14, 2020	By:	/s/ Yuying Zhang
		Yuying Zhang
		Chief Executive Officer
		(Principal Executive Officer)
Dated: February 14, 2020	By:	/s/ Sai (Sam) Wang
		Sai (Sam) Wang
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

53

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE 13A-14(A),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Yuying Zhang, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended December 31, 2019 of Shineco, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2020	By:	/s/ Yuying Zhang
		Yuying Zhang
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE 13A-14(A),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sai (Sam) Wang, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended December 31, 2019 of Shineco, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2020	By:	/s/ Sai (Sam) Wang
		Sai (Sam) Wang
		Chief Financial Officer
		(Principal Finance and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Yuying Zhang, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of Shineco, Inc. (the “Company”) for the period ended December 31, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 14, 2020	By:	/s/ Yuying Zhang
		Yuying Zhang
		Chief Executive Officer (Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Sai (Sam) Wang, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of Shineco, Inc. (the “Company”) for the period ended December 31, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 14, 2020	By:	/s/ Sai (Sam) Wang
		Sai (Sam) Wang
		Chief Financial Officer (Principal Financial and Accounting Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

XML

Distribution Rights

6 Months Ended

Dec. 31, 2019

Distribution Rights [Abstract]

DISTRIBUTION RIGHTS

NOTE 6 - DISTRIBUTION RIGHTS

The Company acquired distribution rights to distribute branded products of Daiso 100-yen shops through the acquisition of Tianjin Tajite. As this distribution right is difficult to acquire and will contribute significant revenue to Tianjin Tajite, such distribution rights were identified and valued as an intangible asset in the acquisition of Tianjin Tajite. The distribution rights, which have no expiration date, have been determined to have an indefinite life. Since the distribution rights have an indefinite life, the Company will evaluate them for impairment at least annually or earlier if determined necessary. As of December 31, 2019, the distribution rights were evaluated at RMB 7,380,000 (US$ 1,059,128).

XML

Acquisition

6 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

ACQUISITION

NOTE 10 - ACQUISITION

On December 12, 2016, the Company entered into a merger and acquisition agreement with Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), a professional e-commerce company distributing Luobuma fabric commodities and branded products of Daiso 100-yen shops, based in Tianjin, China, to acquire a 51 % equity interest of Tianjin Tajite.

Pursuant to the agreement, the Company made a payment of RMB 14,000,000 (approximately US$ 2.1 million) at the end of December, 2016 as the total consideration for the acquisition of Tianjin Tajite.

On October 26, 2017, the Company completed the acquisition of Tianjin Tajite. The acquisition provides a unique opportunity for the Company to enter the market of Luobuma fabric commodities and branded products of Daiso 100-yen shops.

The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.

As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.

The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:

Accounts receivable, net		26,635
Inventory		57,275
Other current assets		182,056
Distribution rights		1,059,128
Property, plant and equipment		13,865
Advance from customers		(77,127	)
Tax payable		(16,648	)
Deferred tax liabilities		(264,782	)
Salary payable		(24,755	)
Accrued liabilities and other current liabilities		(980,277	)
Non-controlling interest		1,406
Goodwill		2,010,649
Total purchase price for acquisition, net of US$ 21,761 of cash	$	1,987,425

The excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill. The results of operations of Tianjin Tajite have been included in the unaudited condensed consolidated statements of operations from the date of acquisition.

In June 2018, the management performed evaluation on the impairment of goodwill. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded an impairment loss on goodwill of Tianjin Tajite.  

The fair value of distribution rights and its estimated useful lives is as follows:

	Preliminary Fair Value		Weighted Average Useful Life (in Years)
Distribution rights	$	1,059,128	(a)

(a) The distribution rights with no expiration date has been determined to have an indefinite life.

Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were nil in the six months ended December 31, 2019.

XML

Commitments and Contigencies (Tables)

6 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum sublease rental income

Twelve months ending December 31:
2020	$	85,350
Total	$	85,350

XML

Short-Term Loans (Tables)

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Schedule of short-term loans

Lender	December 31, 2019		Maturity Date	Int. Rate/Year
Agricultural Bank of China-c		1,435,132	2020-2-25		5.66	%
Agricultural Bank of China-c		287,027	2020-8-26		5.60	%
Total	$	1,722,159

Lender	June 30, 2019		Maturity Date		Int. Rate/Year
MY Bank-a		7,282	2019-8-29	*		15.80	%
Agricultural Bank of China-b		291,256	2019-8-12	*		5.66	%
Agricultural Bank of China-b		655,327	2019-11-13			3.92	%
Agricultural Bank of China-c		1,456,282	2020-2-25			5.66	%
Total	$	2,410,147

The loans outstanding were guaranteed by the following properties, entities or individuals: 

a. Not collateralized or guaranteed.

b. Guaranteed by a commercial credit guaranty company, unrelated to the Company and also by Jiping Chen, a shareholder of the Company.

c. Collateralized by the building owned by Xiaoyan Chen and Jing Chen, who are both related parties of the Company. Xiaoyan Chen is one of the shareholders of Ankang Longevity Group. Jing Chen is the sister of the Xiaoyan Chen but not a shareholder of Ankang Longevity Group.

* The Company repaid the loan in full on maturity date.

XML

Summary of Significant Accounting Policies (Details 1)	6 Months Ended
	Dec. 31, 2019
Buildings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	20 years
Buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	50 years
Machinery equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	5 years
Machinery equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	10 years
Motor vehicles [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	5 years
Motor vehicles [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	10 years
Office equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	5 years
Office equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	10 years
Farmland leasehold improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	12 years
Farmland leasehold improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	18 years

XML

Acquisition (Details) - Tianjin Tajite [Member]	Dec. 31, 2019 USD ($)
Business Acquisition [Line Items]
Accounts receivable, net	$ 26,635
Inventory	57,275
Other current assets	182,056
Distribution rights	1,059,128
Property, plant and equipment	13,865
Advance from customers	(77,127)
Tax payable	(16,648)
Deferred tax liabilities	(264,782)
Salary payable	(24,755)
Accrued liabilities and other current liabilities	(980,277)
Non-controlling interest	1,406
Goodwill	2,010,649
Total purchase price for acquisition, net of US$ 22,076 of cash	$ 1,987,425

XML

Investments (Details 1) - USD ($)	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Equity Method Investments and Joint Ventures [Abstract]
Current assets	$ 38,714,700		$ 35,675,858
Noncurrent assets	220,420		241,580
Current liabilities	29,531,039		$ 26,668,485
Net sales	16,283,932	$ 16,306,851
Gross profit	1,674,366	2,020,501
Income from operations	287,432	665,455
Net income	$ 286,902	$ 589,545

XML

Leases (Details 2) - USD ($)	Dec. 31, 2019	Jul. 02, 2019
Prepaid Leases [Abstract]
2020	$ 735,163
2021	310,101
2022	209,689
2023	209,163
2024	209,163
Thereafter	1,439,177
Total lease payments	3,112,456
Less: imputed interest	(7,170)
Less: prepayments	(2,690,874)
Present value of lease liabilities	$ 414,412	$ 450,123

XML

Segment Reporting (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Segment Reporting Information [Line Items]
Segment revenue	$ 7,868,612	$ 8,381,932	$ 14,915,393	$ 15,971,013
Cost of revenue and related business and sales tax	5,503,625	5,981,853	10,910,511	11,460,007
Gross profit	$ 2,364,987	$ 2,400,079	$ 4,004,882	$ 4,511,006
Gross profit %	30.10%	28.60%	26.90%	28.20%
Assets	$ 83,072,708		$ 83,072,708		$ 83,739,473
Luobuma products [Member]
Segment Reporting Information [Line Items]
Segment revenue	73,240	$ 344,539	138,759	$ 510,724
Cost of revenue and related business and sales tax	37,653	167,357	269,157	221,786
Gross profit	$ 35,587	$ 177,182	$ (130,398)	$ 288,938
Gross profit %	48.60%	51.40%	(94.00%)	56.60%
Assets	$ 4,971,200		$ 4,971,200		6,268,974
Herbal products [Member]
Segment Reporting Information [Line Items]
Segment revenue	3,539,279	$ 3,499,581	6,839,600	$ 6,797,904
Cost of revenue and related business and sales tax	2,627,716	2,580,690	5,227,120	5,154,956
Gross profit	$ 911,563	$ 918,891	$ 1,612,480	$ 1,642,948
Gross profit %	25.80%	26.30%	23.60%	24.20%
Assets	$ 46,125,282		$ 46,125,282		45,095,019
Other agricultural products [Member]
Segment Reporting Information [Line Items]
Segment revenue	4,256,093	$ 4,537,812	7,937,034	$ 8,662,385
Cost of revenue and related business and sales tax	2,838,256	3,233,806	5,414,234	6,083,265
Gross profit	$ 1,417,837	$ 1,304,006	$ 2,522,800	$ 2,579,120
Gross profit %	33.30%	28.70%	31.80%	29.80%
Assets	$ 31,976,226		$ 31,976,226		$ 32,375,480

XML

Land Use Rights (Details) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Land use rights	$ 1,596,295	$ 1,619,820
Less: accumulated amortization	(366,603)	(355,511)
Land use rights, net	$ 1,229,692	$ 1,264,309

XML

Inventories (Details) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 609,963	$ 974,639
Work-in-process	1,177,110	651,769
Finished goods	1,936,918	1,533,318
Less: inventory reserve	(1,105,948)	(944,167)
Total	$ 2,618,043	$ 2,215,559

XML

Investments (Details) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Schedule of Equity Method Investments [Line Items]
Total	$ 6,696,183	$ 6,650,944
Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (Ankang Longevity Pharmacy) [Member]
Schedule of Equity Method Investments [Line Items]
Total	3,774,388	3,717,277
Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Chain Co., Ltd. [Member]
Schedule of Equity Method Investments [Line Items]
Total	840,853	822,058
Zhejiang Zhen'Ai Network Warehousing Services Co., Ltd. [Member]
Schedule of Equity Method Investments [Line Items]
Total	$ 2,080,942	$ 2,111,609

XML

Related Party Transactions (Details 1) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Related Party Transaction [Line Items]
Due to related parties	$ 495,555	$ 234,500
Wu Yang [Member]
Related Party Transaction [Line Items]
Due to related parties	91,920	93,275
Wang Sai [Member]
Related Party Transaction [Line Items]
Due to related parties	8,611	8,738
Chen Jiping [Member]
Related Party Transaction [Line Items]
Due to related parties		989
Zhang Yuying [Member]
Related Party Transaction [Line Items]
Due to related parties		2,913
Zhou Guocong [Member]
Related Party Transaction [Line Items]
Due to related parties	11,481
Li Baolin [Member]
Related Party Transaction [Line Items]
Due to related parties	215,270
Zhao Min [Member]
Related Party Transaction [Line Items]
Due to related parties	$ 168,273	$ 128,585

XML

Summary of Significant Accounting Policies

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information pursuant to the rules of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2019, which was filed on September 27, 2019.

The unaudited condensed consolidated financial statements of the Company reflect the principal activities of the Company, its subsidiaries, its VIEs and its VIEs’ subsidiaries. The non-controlling interest represents the minority shareholders’ interest in the Company’s majority owned subsidiaries and VIEs. All intercompany accounts and transactions have been eliminated in consolidation.

Consolidation of Variable Interest Entities

VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The carrying amount of the VIEs and their subsidiaries’ consolidated assets and liabilities are as follows:

	December 31, 2019			June 30, 2019
Current assets	$	57,539,496		$	57,328,097
Plant and equipment, net		8,562,202			8,965,671
Other non-current assets		11,382,612			11,028,775
Total assets		77,484,310			77,322,543
Total liabilities		(5,301,117	)		(6,090,955	)
Net assets	$	72,183,193		$	71,231,588

Non-controlling Interests

US GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet. In addition, the amounts attributable to the non-controlling interests in the net income (loss) of these entities are reported separately in the unaudited condensed consolidated statements of income and comprehensive income.

Risks and Uncertainties

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environment in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among other factors, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, changes could affect the Company’s interest in these entities and its operations in the PRC.

Members of the current management team own controlling interests in the Company and are also the owners of the VIEs in the PRC. The Company only controls the VIEs through contractual arrangements which obligate it to absorb the risk of loss and to receive the residual expected returns. As such, the controlling shareholders of the Company and the VIEs could cancel these agreements or permit them to expire at the end of the agreement terms, as a result of which the Company would not retain control of the VIEs. In addition, should these agreements be challenged or litigated, they would also be subject to the laws and courts of the PRC legal system which could make enforcing the Company’s rights difficult.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting periods. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant, and equipment, and intangible assets, the recoverability of long-lived assets and the valuation of accounts receivable, deferred taxes and inventory reserves. Actual results could differ from those estimates.

Revenue Recognition

The Company previously recognized revenue from sales of Luobuma products, Chinese medicinal herbal products and agricultural products, as well as providing logistic services and other processing services to external customers. The Company recognized revenue when all of the following have occurred: (i) there was persuasive evidence of an arrangement with a customer; (ii) delivery had occurred or services had been rendered; (iii) the sales price was fixed or determinable; and (iv) the Company’s collection of such fees was reasonably assured. These criteria, as related to the Company’s revenue, were considered to have been met as follows:

Sales of products: The Company recognized revenue from the sale of products when the goods were delivered and title to the goods passed to the customer provided that there were no uncertainties regarding customer acceptance; persuasive evidence of an arrangement existed; the sales price was fixed or determinable; and collectability was deemed probable.

Revenue from the rendering of services: Revenue from international freight forwarding, domestic air and overland freight forwarding services was recognized upon the performance of services as stipulated in the underlying contract or when commodities were being released from the customer’s warehouse; the service price was fixed or determinable; and collectability was deemed probable.

With the adoption of ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company adopted the new revenue standard beginning July 1, 2018, and adopted a modified retrospective approach upon adoption. The Company believes that its previous revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company’s contracts. There is no significant impact upon adoption of the new guidance.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, cash on deposit and other highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased. The Company maintains cash with various financial institutions mainly in the PRC. As of December 31, 2019 and June 30, 2019, the Company had no cash equivalents.

Under PRC law, it is generally required that a commercial bank in the PRC that holds third party cash deposits protect the depositors’ rights over and interests in their deposited money. PRC banks are subject to a series of risk control regulatory standards, and PRC bank regulatory authorities are empowered to take over the operation and management of any PRC bank that faces a material credit crisis. The Company monitors the banks utilized and has not experienced any problems. 

Accounts Receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as necessary. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customers’ historical payment history, their current credit-worthiness and current economic trends. The fair value of long-term receivables is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date. As of December 31, 2019 and June 30, 2019, the allowance for doubtful accounts was US$ 4,769,928 and US$ 4,323,141, respectively. Accounts are written off against the allowance after efforts at collection prove unsuccessful.

Inventories

Inventories, which are stated at the lower of cost or net realizable value, consist of raw materials, work-in-progress, and finished goods related to the Company’s products. Cost is determined using the first in first out (“FIFO”) method.  Agricultural products that the Company farms are recorded at cost, which includes direct costs such as seed selection, fertilizer, labor cost and contract fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of prepayments of farmland leases and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to the harvested crops costs when they are sold. The Company periodically evaluates its inventory and records an inventory reserve for certain inventories that may not be saleable or whose cost exceeds net realizable value.

Advances to Suppliers

Advances to suppliers consist of payments to suppliers for materials that have not been received. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. As of December 31, 2019 and June 30, 2019, the Company had an allowance for uncollectible advances to suppliers of US$ 2,417,959 and US$ 431,646, respectively.

Business Acquisitions

Business acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity, and recognize and measure goodwill or a bargain gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values on the date acquired and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value of the net assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than twelve months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requires the Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a business combination.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). 

Leases 

The Company adopted ASU 2016-02, “Leases” on July 1, 2019 and used the alternative transition approach which permits the effects of adoption to be applied at the effective date. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease exemption and combining the lease and non-lease components practical expedients. The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s balance sheet for office space operating leases. Upon adoption, the Company recognized additional operating liabilities of approximately US$ 0.4 million, with corresponding ROU assets of US$ 3.2 million based on the present value of the remaining rental payments under current leasing standards for existing operating leases. There was no cumulative effect of adopting the standard.  

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for additions, major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value, if any, over an asset’s estimated useful life. Farmland leasehold improvements are amortized over the shorter of lease term or estimated useful lives of the underlying assets. The estimated useful lives of the Company’s property and equipment are as follows:

	Estimated useful lives
Buildings	20-50 years
Machinery equipment	5-10 years
Motor vehicles	5-10 years
Office equipment	5-10 years
Farmland leasehold improvements	12-18 years

Land Use Rights

According to Chinese laws and regulations regarding land use rights, land in urban districts is owned by the State, while land in the rural areas and suburban areas, except otherwise provided for by the State, is collectively owned by individuals designated as resident farmers by the State. In accordance with the legal principle that land ownership is separate from the right to the use of the land, the government grants individuals and companies the rights to use parcels of land for a specified period of time. Land use rights, which are usually prepaid, are stated at cost less accumulated amortization. Amortization is provided over the life of the land use rights, using the straight-line method. The useful life is 50 years, based on the term of the land use rights.

Long-lived Assets

Finite-lived assets and intangibles are reviewed for impairment testing when circumstances require. For purposes of evaluating the recoverability of long-lived assets, when undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. The long-lived assets of the Company that are subject to evaluation consist primarily of property, plant and equipment, land use rights, investments and long-term prepaid leases. For the six and three months ended December 31, 2019 and 2018, the Company did not recognize any impairment of its long-lived assets.

Fair Value of Financial Instruments

The Company follows the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs , other than quoted prices in level,  that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the asset or liability.

The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This ASC also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not have any uncertain tax positions at December 31, 2019 and June 30, 2019. The Company has not provided deferred taxes for undistributed earnings of non-U.S. subsidiaries at December 31, 2019, as it is the Company’s policy to indefinitely reinvest these earnings in non-U.S. operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable.

The statute of limitations for the Company’s U.S. federal income tax returns and certain state income tax returns remains open for tax year 2015 and thereafter. As of December 31, 2019, the tax years ended December 31, 2014 through December 31, 2019 for the Company’s People’s Republic of China (“PRC”) subsidiaries remain open for statutory examination by PRC tax authorities.

On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of The Act, the U.S. corporate tax rate decreased from 35% to 21%. As the Company has a June 30 fiscal year end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ended June 30, 2018, and 21% for subsequent fiscal years. Additionally, The Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to re-measure the Company’s income tax liability and record an estimated income tax expense of US$ 744,766 for the year ended June 30, 2018. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of the Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2019 when the analysis is complete. The Company elects to pay the transition tax over an eight-year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).

Value Added Tax

Sales revenue represents the invoiced value of goods, net of a Value-Added Tax (“VAT”). Before May 1, 2018, all of the Company’s products that were sold in the PRC were subject to a Chinese value-added tax at a rate of 17% of the gross sales price. After May 1, 2018, the Company subject a tax rate of 16%, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law. This VAT may be offset by VAT paid by the Company is on raw materials and other materials included in the cost of producing finished products or acquiring finished products. The Company records a VAT payable or VAT receivable in the accompanying unaudited condensed consolidated financial statements. 

Foreign Currency Translation

The Company uses the United States dollar (“U.S. dollars”, “USD” or “US$”) for financial reporting purposes. The Company’s subsidiaries and VIEs maintain their books and records in their functional currency of Renminbi (“RMB”), the currency of the PRC. 

In general, for consolidation purposes, the Company translates the assets and liabilities of its subsidiaries and VIEs into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statements of income and cash flows are translated at average exchange rates during the reporting periods. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the financial statements of the subsidiaries and VIEs are recorded as accumulated other comprehensive income (loss).

The balance sheet amounts, with the exception of equity, at December 31, 2019 and June 30, 2019 were translated at 1 RMB to 0.1435 USD and at 1 RMB to 0.1456 USD, respectively. The average translation rates applied to the income and cash flow statement amounts for the six months ended December 31, 2019 and 2018 were at 1 RMB to 0.1422 USD and at 1 RMB to 0.1454 USD, respectively. The average translation rates applied to income and cash flow statement amounts for the three months ended December 31, 2019 and 2018 were at 1 RMB to 0.1420 USD and at 1 RMB to 0.1446 USD, respectively.

Comprehensive Income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to USD is reported in other comprehensive income (loss) in the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss). 

Equity Investment

An investment in which the Company has the ability to exercise significant influence, but does not have a controlling interest, is accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the Board of Directors, voting rights and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate.

Earnings per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., outstanding convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There is no anti-dilutive effect for the six and three months ended December 31, 2019 and 2018.

New Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to Accounting Standards Codification (“ASC”) 718 upon vesting which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, policies for timing of transfers between different levels for fair value measurements, and the valuation processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company expects that the adoption of this ASU will not have a material impact on its financial statements

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” (ASU 2018-15), to align the requirements for capitalizing implementation costs in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs relating to internal-use software. The update requires entities in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset and which costs to expense. ASU 2018-15 is effective for the Corporation on January 1, 2020 and may be applied using either the retrospective or prospective approach. Early adoption is permitted. The Company expects that the adoption of this ASU will have a material impact on its financial statements. 

In October 2018, the FASB issued ASU No. 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities”. The new standard changes how entities evaluate decision-making fees under the variable interest entity guidance. The new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance. The standard should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption. The Company expects that the adoption of this ASU will not have a material impact on its financial statements. 

In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Accounting Standard Codification (“ASC”) 842, Leases. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In November 2019, the FASB issued ASU No. 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The guidance identifies, evaluates, and improves areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided. The amendments in that Update expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. For entities that have adopted the amendments in Update 2018-07, the updated guidance is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal 2021. Early adoption is permitted. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The specific areas of potential simplification in this Update were submitted by stakeholders as part of the Simplification Initiative. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

The Company believes that other recent accounting pronouncement updates will not have a material effect on the Company’s condensed unaudited consolidated financial statements.

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Taxes (Details 2) - USD ($)	6 Months Ended	12 Months Ended
	Dec. 31, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Beginning balance	$ 519,671	$ 539,061
Current year addition
Exchange difference	(7,547)	(19,390)
Ending balance	$ 512,124	$ 519,671

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Condensed Consolidated Statements of Income (loss) and Comprehensive Income (loss) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
REVENUE	$ 7,868,612	$ 8,381,932	$ 14,915,393	$ 15,971,013
COST OF REVENUE
Cost of product and services	5,488,425	5,957,257	10,882,848	11,421,721
Business and sales related tax	15,200	24,596	27,663	38,286
Total cost of revenue	5,503,625	5,981,853	10,910,511	11,460,007
GROSS PROFIT	2,364,987	2,400,079	4,004,882	4,511,006
OPERATING EXPENSES
General and administrative expenses	2,092,314	1,562,745	5,446,957	3,089,931
Selling expenses	73,269	289,846	195,155	487,181
Total operating expenses	2,165,583	1,852,591	5,642,112	3,577,112
INCOME (LOSS) FROM OPERATIONS	199,404	547,488	(1,637,230)	933,894
OTHER INCOME (EXPENSE)
Income from equity method investments	70,683	145,742	140,582	288,877
Purchase rebate income		225,187		517,626
Other income	48,211	51,730	38,457	104,299
Interest income (expense), net	2,818	(2,836)	(308)	(10,610)
Total other income	121,712	419,823	178,731	900,192
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES	321,116	967,311	(1,458,499)	1,834,086
PROVISION FOR INCOME TAXES	169,175	225,363	164,392	444,146
NET INCOME (LOSS)	151,941	741,948	(1,622,891)	1,389,940
Net income attributable to non-controlling interest	39,458	18,068	57,263	33,236
NET INCOME (LOSS) ATTRIBUTABLE TO SHINECO, INC.	112,483	723,880	(1,680,154)	1,356,704
COMPREHENSIVE INCOME (LOSS)
Net income (loss)	151,941	741,948	(1,622,891)	1,389,940
Other comprehensive gain (loss): foreign currency translation gain (loss)	1,747,696	30,097	(1,110,841)	(2,627,235)
Total comprehensive income (loss)	1,899,637	772,045	(2,733,732)	(1,237,295)
Less: comprehensive income (loss) attributable to non-controlling interest	66,147	17,985	41,787	(3,643)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHINECO, INC.	$ 1,833,490	$ 754,060	$ (2,775,519)	$ (1,233,652)
Weighted average number of shares basic and diluted	27,333,428	22,871,772	25,760,163	22,079,624
Basic and diluted earnings (loss) per common share	$ 0.00	$ 0.03	$ (0.07)	$ 0.06

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Land Use Rights (Tables)

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of land use rights

	December 31, 2019			June 30, 2019
Land use rights	$	1,596,295		$	1,619,820
Less: accumulated amortization		(366,603	)		(355,511	)
Land use rights, net	$	1,229,692		$	1,264,309

Schedule of estimated future amortization expenses

Twelve months ending December 31:
2020	$	31,926
2021		31,926
2022		31,926
2023		31,926
2024		31,926
Thereafter		1,070,062
Total	$	1,229,692

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Concentrations and Risks

6 Months Ended

Dec. 31, 2019

Risks and Uncertainties [Abstract]

CONCENTRATIONS AND RISKS

NOTE 14 - CONCENTRATIONS AND RISKS

The Company maintains principally all bank accounts in the PRC. The cash balance held in the PRC bank accounts was US$ 42,070,119 and US$ 35,311,106 as of December 31, 2019 and June 30, 2019, respectively.

During the six months ended December 31, 2019 and 2018, almost 100% of the Company's assets were located in the PRC and 100% of the Company's revenues were derived from its subsidiaries and VIEs located in the PRC.

For the six months ended December 31, 2019, four customers accounted for approximately 13%, 11%, 10% and 10% of the Company's total sales, respectively. For the three months ended December 31, 2019, four customers accounted for approximately 12%, 10%, 10% and 10% of the Company's total sales, respectively. At December 31, 2019, five customers accounted for approximately 70% of the Company's accounts receivable.

For the six months ended December 31, 2018, five customers accounted for approximately 14%, 11%, 11%, 11% and 11% of the Company's total sales, respectively. For the three months ended December 31, 2018, two customers accounted for approximately 15% and 12% of the Company's total sales, respectively.

For the six months ended December 31, 2019, two vendors accounted for approximately 41% and 14% of the Company's total purchases, respectively. For the six months ended December 31, 2018, three vendors accounted for approximately 45%, 15% and 10% of the Company's total purchases, respectively.

For the three months ended December 31, 2019, two vendor accounted for approximately 45% and 13% of the Company's total purchases, respectively. For the three months ended December 31, 2018, one vendor accounted for approximately 28% of the Company's total purchases, respectively.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information pursuant to the rules of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2019, which was filed on September 27, 2019.

The unaudited condensed consolidated financial statements of the Company reflect the principal activities of the Company, its subsidiaries, its VIEs and its VIEs’ subsidiaries. The non-controlling interest represents the minority shareholders’ interest in the Company’s majority owned subsidiaries and VIEs. All intercompany accounts and transactions have been eliminated in consolidation.

Consolidation of Variable Interest Entities

Consolidation of Variable Interest Entities

VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The carrying amount of the VIEs and their subsidiaries’ consolidated assets and liabilities are as follows:

	December 31, 2019			June 30, 2019
Current assets	$	57,539,496		$	57,328,097
Plant and equipment, net		8,562,202			8,965,671
Other non-current assets		11,382,612			11,028,775
Total assets		77,484,310			77,322,543
Total liabilities		(5,301,117	)		(6,090,955	)
Net assets	$	72,183,193		$	71,231,588

Non-controlling Interests

Non-controlling Interests

US GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet. In addition, the amounts attributable to the non-controlling interests in the net income (loss) of these entities are reported separately in the unaudited condensed consolidated statements of income and comprehensive income.

Risks and Uncertainties

Risks and Uncertainties

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environment in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among other factors, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, changes could affect the Company’s interest in these entities and its operations in the PRC.

Members of the current management team own controlling interests in the Company and are also the owners of the VIEs in the PRC. The Company only controls the VIEs through contractual arrangements which obligate it to absorb the risk of loss and to receive the residual expected returns. As such, the controlling shareholders of the Company and the VIEs could cancel these agreements or permit them to expire at the end of the agreement terms, as a result of which the Company would not retain control of the VIEs. In addition, should these agreements be challenged or litigated, they would also be subject to the laws and courts of the PRC legal system which could make enforcing the Company’s rights difficult.

Use of Estimates

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting periods. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant, and equipment, and intangible assets, the recoverability of long-lived assets and the valuation of accounts receivable, deferred taxes and inventory reserves. Actual results could differ from those estimates.

Revenue Recognition

Revenue Recognition

The Company previously recognized revenue from sales of Luobuma products, Chinese medicinal herbal products and agricultural products, as well as providing logistic services and other processing services to external customers. The Company recognized revenue when all of the following have occurred: (i) there was persuasive evidence of an arrangement with a customer; (ii) delivery had occurred or services had been rendered; (iii) the sales price was fixed or determinable; and (iv) the Company’s collection of such fees was reasonably assured. These criteria, as related to the Company’s revenue, were considered to have been met as follows:

Sales of products: The Company recognized revenue from the sale of products when the goods were delivered and title to the goods passed to the customer provided that there were no uncertainties regarding customer acceptance; persuasive evidence of an arrangement existed; the sales price was fixed or determinable; and collectability was deemed probable.

Revenue from the rendering of services: Revenue from international freight forwarding, domestic air and overland freight forwarding services was recognized upon the performance of services as stipulated in the underlying contract or when commodities were being released from the customer’s warehouse; the service price was fixed or determinable; and collectability was deemed probable.

With the adoption of ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company adopted the new revenue standard beginning July 1, 2018, and adopted a modified retrospective approach upon adoption. The Company believes that its previous revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company’s contracts. There is no significant impact upon adoption of the new guidance.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, cash on deposit and other highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased. The Company maintains cash with various financial institutions mainly in the PRC. As of December 31, 2019 and June 30, 2019, the Company had no cash equivalents.

Under PRC law, it is generally required that a commercial bank in the PRC that holds third party cash deposits protect the depositors’ rights over and interests in their deposited money. PRC banks are subject to a series of risk control regulatory standards, and PRC bank regulatory authorities are empowered to take over the operation and management of any PRC bank that faces a material credit crisis. The Company monitors the banks utilized and has not experienced any problems.

Accounts Receivable

Accounts Receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as necessary. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customers’ historical payment history, their current credit-worthiness and current economic trends. The fair value of long-term receivables is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date. As of December 31, 2019 and June 30, 2019, the allowance for doubtful accounts was US$ 4,769,928 and US$ 4,323,141, respectively. Accounts are written off against the allowance after efforts at collection prove unsuccessful.

Inventories

Inventories

Inventories, which are stated at the lower of cost or net realizable value, consist of raw materials, work-in-progress, and finished goods related to the Company’s products. Cost is determined using the first in first out (“FIFO”) method.  Agricultural products that the Company farms are recorded at cost, which includes direct costs such as seed selection, fertilizer, labor cost and contract fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of prepayments of farmland leases and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to the harvested crops costs when they are sold. The Company periodically evaluates its inventory and records an inventory reserve for certain inventories that may not be saleable or whose cost exceeds net realizable value.

Advances to Suppliers

Advances to Suppliers

Advances to suppliers consist of payments to suppliers for materials that have not been received. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. As of December 31, 2019 and June 30, 2019, the Company had an allowance for uncollectible advances to suppliers of US$ 2,417,959 and US$ 431,646, respectively.

Business Acquisitions

Business Acquisitions

Business acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity, and recognize and measure goodwill or a bargain gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values on the date acquired and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value of the net assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than twelve months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requires the Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a business combination.

Goodwill

Goodwill

Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available).

Leases

Leases 

The Company adopted ASU 2016-02, “Leases” on July 1, 2019 and used the alternative transition approach which permits the effects of adoption to be applied at the effective date. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease exemption and combining the lease and non-lease components practical expedients. The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s balance sheet for office space operating leases. Upon adoption, the Company recognized additional operating liabilities of approximately US$ 0.4 million, with corresponding ROU assets of US$ 3.2 million based on the present value of the remaining rental payments under current leasing standards for existing operating leases. There was no cumulative effect of adopting the standard.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for additions, major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value, if any, over an asset’s estimated useful life. Farmland leasehold improvements are amortized over the shorter of lease term or estimated useful lives of the underlying assets. The estimated useful lives of the Company’s property and equipment are as follows:

	Estimated useful lives
Buildings	20-50 years
Machinery equipment	5-10 years
Motor vehicles	5-10 years
Office equipment	5-10 years
Farmland leasehold improvements	12-18 years

Land Use Rights

Land Use Rights

According to Chinese laws and regulations regarding land use rights, land in urban districts is owned by the State, while land in the rural areas and suburban areas, except otherwise provided for by the State, is collectively owned by individuals designated as resident farmers by the State. In accordance with the legal principle that land ownership is separate from the right to the use of the land, the government grants individuals and companies the rights to use parcels of land for a specified period of time. Land use rights, which are usually prepaid, are stated at cost less accumulated amortization. Amortization is provided over the life of the land use rights, using the straight-line method. The useful life is 50 years, based on the term of the land use rights.

Long-lived Assets

Long-lived Assets

Finite-lived assets and intangibles are reviewed for impairment testing when circumstances require. For purposes of evaluating the recoverability of long-lived assets, when undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. The long-lived assets of the Company that are subject to evaluation consist primarily of property, plant and equipment, land use rights, investments and long-term prepaid leases. For the six and three months ended December 31, 2019 and 2018, the Company did not recognize any impairment of its long-lived assets.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company follows the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs , other than quoted prices in level,  that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the asset or liability.

The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

Income Taxes

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This ASC also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not have any uncertain tax positions at December 31, 2019 and June 30, 2019. The Company has not provided deferred taxes for undistributed earnings of non-U.S. subsidiaries at December 31, 2019, as it is the Company’s policy to indefinitely reinvest these earnings in non-U.S. operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable.

The statute of limitations for the Company’s U.S. federal income tax returns and certain state income tax returns remains open for tax year 2015 and thereafter. As of December 31, 2019, the tax years ended December 31, 2014 through December 31, 2019 for the Company’s People’s Republic of China (“PRC”) subsidiaries remain open for statutory examination by PRC tax authorities.

On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of The Act, the U.S. corporate tax rate decreased from 35% to 21%. As the Company has a June 30 fiscal year end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ended June 30, 2018, and 21% for subsequent fiscal years. Additionally, The Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to re-measure the Company’s income tax liability and record an estimated income tax expense of US$ 744,766 for the year ended June 30, 2018. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of the Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2019 when the analysis is complete. The Company elects to pay the transition tax over an eight-year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).

Value Added Tax

Value Added Tax

Sales revenue represents the invoiced value of goods, net of a Value-Added Tax (“VAT”). Before May 1, 2018, all of the Company’s products that were sold in the PRC were subject to a Chinese value-added tax at a rate of 17% of the gross sales price. After May 1, 2018, the Company subject a tax rate of 16%, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law. This VAT may be offset by VAT paid by the Company is on raw materials and other materials included in the cost of producing finished products or acquiring finished products. The Company records a VAT payable or VAT receivable in the accompanying unaudited condensed consolidated financial statements.

Foreign Currency Translation

Foreign Currency Translation

The Company uses the United States dollar (“U.S. dollars”, “USD” or “US$”) for financial reporting purposes. The Company’s subsidiaries and VIEs maintain their books and records in their functional currency of Renminbi (“RMB”), the currency of the PRC. 

In general, for consolidation purposes, the Company translates the assets and liabilities of its subsidiaries and VIEs into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statements of income and cash flows are translated at average exchange rates during the reporting periods. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the financial statements of the subsidiaries and VIEs are recorded as accumulated other comprehensive income (loss).

The balance sheet amounts, with the exception of equity, at December 31, 2019 and June 30, 2019 were translated at 1 RMB to 0.1435 USD and at 1 RMB to 0.1456 USD, respectively. The average translation rates applied to the income and cash flow statement amounts for the six months ended December 31, 2019 and 2018 were at 1 RMB to 0.1422 USD and at 1 RMB to 0.1454 USD, respectively. The average translation rates applied to income and cash flow statement amounts for the three months ended December 31, 2019 and 2018 were at 1 RMB to 0.1420 USD and at 1 RMB to 0.1446 USD, respectively.

Comprehensive Income

Comprehensive Income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to USD is reported in other comprehensive income (loss) in the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss).

Equity Investment

Equity Investment

An investment in which the Company has the ability to exercise significant influence, but does not have a controlling interest, is accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the Board of Directors, voting rights and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate.

Earnings per Share

Earnings per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., outstanding convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There is no anti-dilutive effect for the six and three months ended December 31, 2019 and 2018.

New Accounting Pronouncements

New Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to Accounting Standards Codification (“ASC”) 718 upon vesting which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, policies for timing of transfers between different levels for fair value measurements, and the valuation processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company expects that the adoption of this ASU will not have a material impact on its financial statements

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” (ASU 2018-15), to align the requirements for capitalizing implementation costs in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs relating to internal-use software. The update requires entities in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset and which costs to expense. ASU 2018-15 is effective for the Corporation on January 1, 2020 and may be applied using either the retrospective or prospective approach. Early adoption is permitted. The Company expects that the adoption of this ASU will have a material impact on its financial statements. 

In October 2018, the FASB issued ASU No. 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities”. The new standard changes how entities evaluate decision-making fees under the variable interest entity guidance. The new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance. The standard should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption. The Company expects that the adoption of this ASU will not have a material impact on its financial statements. 

In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Accounting Standard Codification (“ASC”) 842, Leases. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In November 2019, the FASB issued ASU No. 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The guidance identifies, evaluates, and improves areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided. The amendments in that Update expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. For entities that have adopted the amendments in Update 2018-07, the updated guidance is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal 2021. Early adoption is permitted. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The specific areas of potential simplification in this Update were submitted by stakeholders as part of the Simplification Initiative. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.

The Company believes that other recent accounting pronouncement updates will not have a material effect on the Company’s condensed unaudited consolidated financial statements.

XML

Distribution Rights (Details)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)	Jun. 30, 2019 USD ($)
Distribution Rights (Textual)
Distribution right | $	$ 1,059,128		$ 1,074,736
RMB [Member]
Distribution Rights (Textual)
Distribution right | ¥		¥ 7,380,000

XML

Property and Equipment (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Property and Equipment (Textual)
Depreciation and amortization expense	$ 241,743	$ 120,920	$ 419,958	$ 307,772

XML

Summary of Significant Accounting Policies (Details Textual) - USD ($)		6 Months Ended	12 Months Ended
	Dec. 22, 2017	Dec. 31, 2019	Jun. 30, 2019	Jun. 30, 2018	Jul. 02, 2019
Summary of Significant Accounting Policies (Textual)
Allowance for doubtful accounts		$ 4,769,928	$ 4,323,141
Advances to suppliers		$ 2,417,959	$ 431,646
Estimated useful life		50 years
Foreign currency translation adjustment, description		The exception of equity, at December 31, 2019 and June 30, 2019 were translated at 1 RMB to 0.1435 USD and at 1 RMB to 0.1456 USD, respectively. The average translation rates applied to the income and cash flow statement amounts for the six months ended December 31, 2019 and 2018 were at 1 RMB to 0.1422 USD and at 1 RMB to 0.1454 USD, respectively. The average translation rates applied to income and cash flow statement amounts for the three months ended December 31, 2019 and 2018 were at 1 RMB to 0.1420 USD and at 1 RMB to 0.1446 USD, respectively.
U.S. statutory federal rate			21.00%	28.00%
Value added tax rate description		Before May 1, 2018, all of the Company’s products that were sold in the PRC were subject to a Chinese value-added tax at a rate of 17% of the gross sales price. After May 1, 2018, the Company subject a tax rate of 16%, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law.
Income tax expense				$ 744,766
Additional operating liabilities		$ 411,280
Right of use assets		$ 3,105,286			$ 3,587,788
Transition tax payment, description		The Company elects to pay the transition tax over an eight-year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).
Land Use Rights [Member]
Summary of Significant Accounting Policies (Textual)
Estimated useful life		50 years
Minimum [Member]
Summary of Significant Accounting Policies (Textual)
U.S. corporate tax rate	21.00%
Percentage of voting stock		20.00%
Maximum [Member]
Summary of Significant Accounting Policies (Textual)
U.S. corporate tax rate	35.00%
Percentage of voting stock		50.00%

XML

Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2019	Feb. 13, 2020
Document and Entity Information [Abstract]
Entity Registrant Name	SHINECO, INC.
Entity Central Index Key	0001300734
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Document Type	10-Q
Document Fiscal Period Focus	Q2
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2020
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		27,333,428
Entity File Number	001-37776
Entity Interactive Data Current	Yes
Entity Incorporation State Country Code	DE

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Condensed Consolidated Statements of Changes in Equity - USD ($)	Common Stock	Additional Paid-In Capital	Statutory Reserve	Retained Earnings	Accumulated Other Comprehensive Loss	Non- Controlling Interest	Total
Balance at Jun. 30, 2018	$ 21,234	$ 23,171,102	$ 4,085,819	$ 46,051,289	$ (1,509,212)	$ 1,053,449	$ 72,873,681
Balance, shares at Jun. 30, 2018	21,234,072
Stock issuance	$ 1,638	1,588,254					1,589,892
Stock issuance, shares	1,637,700
Net income (loss) for the year				1,356,704		33,236	1,389,940
Appropriation of statutory reserve			83,523	(83,523)
Foreign currency translation loss					(2,590,356)	(36,879)	(2,627,235)
Balance at Dec. 31, 2018	$ 22,872	24,759,356	4,169,342	47,324,470	(4,099,568)	1,049,806	73,226,278
Balance, shares at Dec. 31, 2018	22,871,772
Balance at Sep. 30, 2018	$ 22,872	24,759,356	4,141,955	46,627,977	(4,129,748)	1,030,360	72,452,772
Balance, shares at Sep. 30, 2018	22,871,772
Net income (loss) for the year				723,880		18,068	741,948
Appropriation of statutory reserve			27,387	(27,387)
Foreign currency translation loss					30,180	1,378	31,558
Balance at Dec. 31, 2018	$ 22,872	24,759,356	4,169,342	47,324,470	(4,099,568)	1,049,806	73,226,278
Balance, shares at Dec. 31, 2018	22,871,772
Balance at Jun. 30, 2019	$ 22,872	24,759,356	4,198,107	46,735,190	(4,184,024)	1,100,613	72,632,114
Balance, shares at Jun. 30, 2019	22,871,772
Stock issuance	$ 4,461	2,518,402					2,522,863
Stock issuance, shares	4,461,656
Net income (loss) for the year				(1,680,154)		57,263	(1,622,891)
Foreign currency translation loss					(1,095,365)	(15,476)	(1,110,841)
Balance at Dec. 31, 2019	$ 27,333	27,277,758	4,198,107	45,055,036	(5,279,389)	1,142,400	72,421,245
Balance, shares at Dec. 31, 2019	27,333,428
Balance at Sep. 30, 2019	$ 27,333	27,277,758	4,198,107	44,942,553	(7,000,396)	1,076,253	70,521,608
Balance, shares at Sep. 30, 2019	27,333,428
Net income (loss) for the year						39,458	151,941
Foreign currency translation loss					1,721,007	26,689	1,747,696
Balance at Dec. 31, 2019	$ 27,333	$ 27,277,758	$ 4,198,107	$ 45,055,036	$ (5,279,389)	$ 1,142,400	$ 72,421,245
Balance, shares at Dec. 31, 2019	27,333,428

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Related Party Transactions (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Related Party Transactions (Textual)
Due to related parties	$ 495,555		$ 495,555		$ 234,500
Shaanxi Pharmaceutical Group [Member]
Related Party Transactions (Textual)
Sales to related party	750,301	$ 998,877	1,545,849	$ 1,801,787
Accounts receivable due from related parties	$ 2,054,466		$ 2,054,466		$ 2,706,111

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Taxes (Details 3) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Income tax payable	$ 3,422,879	$ 3,425,080
Value added tax payable	542,600	536,486
Business tax and other taxes payable	7,478	5,909
Total	3,972,957	3,967,475
Less: current portion	3,347,354	3,341,872
Income tax payable - noncurrent portion	$ 625,603	$ 625,603

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Inventories

6 Months Ended

Dec. 31, 2019

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 3 - INVENTORIES

The inventories consist of the following:

	December 31, 2019			June 30, 2019
Raw materials	$	609,963		$	974,639
Work-in-process		1,177,110			651,769
Finished goods		1,936,918			1,533,318
Less: inventory reserve		(1,105,948	)		(944,167	)
Total	$	2,618,043		$	2,215,559

Work-in-process includes direct costs such as seed selection, fertilizer, labor cost and subcontractor fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of the prepayment of the farmland lease fees and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to harvested crop costs when they are sold.

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Commitments and Contigencies

6 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTIGENCIES

NOTE 15 - COMMITMENTS AND CONTIGENCIES

Lease Commitments

The Company sublets the above-mentioned farmland to a third party under a non-cancelable operating lease agreement through May 31, 2020. The future minimum sublease rental income to be received is as follows: 

Twelve months ending December 31:
2020	$	85,350
Total	$	85,350

Sublease rental income totaled US$ 102,420 and US$ 104,688 for the six months ended December 31, 2019 and 2018, respectively.

Sublease rental income totaled US$ 51,111 and US$ 51,784 for the three months ended December 31, 2019 and 2018, respectively.

Legal Contingencies

On May 16, 2017, Bonwick Capital Partners, LLC ("Plaintiff") commenced a lawsuit (Case No. 1:17-cv-03681-PGG) against the Company in the United States District Court for the Southern District of New York. Plaintiff alleges that the Company entered into an agreement with Plaintiff (the "Agreement"), pursuant to which Plaintiff was to provide the Company with financial advisory services in connection with the Company's initial public offering in the United States. Plaintiff alleges that the Company breached the Agreement and seeks money damages up to US$ 6 million. The Company believes that these claims are without merit and intends to vigorously defend its position.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Schedule of the VIEs and their subsidiaries' consolidated assets and liabilities

	December 31, 2019			June 30, 2019
Current assets	$	57,539,496		$	57,328,097
Plant and equipment, net		8,562,202			8,965,671
Other non-current assets		11,382,612			11,028,775
Total assets		77,484,310			77,322,543
Total liabilities		(5,301,117	)		(6,090,955	)
Net assets	$	72,183,193		$	71,231,588

Schedule of estimated useful lives of property and equipment

	Estimated useful lives
Buildings	20-50 years
Machinery equipment	5-10 years
Motor vehicles	5-10 years
Office equipment	5-10 years
Farmland leasehold improvements	12-18 years

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Investments (Tables)

6 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Schedule of investments in unconsolidated entities

	December 31, 2019		June 30, 2019
Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (Ankang Longevity Pharmacy)	$	3,774,388	$	3,717,277
Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Chain Co., Ltd.		840,853		822,058
Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd.		2,080,942		2,111,609
Total	$	6,696,183	$	6,650,944

Schedule of financial information of unconsolidated entities

	December 31, 2019		June 30, 2019
Current assets	$	38,714,700	$	35,675,858
Noncurrent assets		220,420		241,580
Current liabilities		29,531,039		26,668,485

	For the six months ended December 31,
	2019		2018
Net sales	$	16,283,932	$	16,306,851
Gross profit		1,674,366		2,020,501
Income from operations		287,432		665,455
Net income		286,902		589,545

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Investments

6 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS

NOTE 7 - INVESTMENTS

Ankang Longevity Group entered into two equity investment agreements with Shaanxi Pharmaceutical Group Pai’ang Medicine Co. Ltd. (“Shaanxi Pharmaceutical Group”), a Chinese state-owned pharmaceutical enterprise to invest a total of RMB 6.8 million (approximately US$ 1.0 million) for a 49% equity interest in a pharmacy retail company called Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and a 49% equity interest in a pharmaceutical wholesale distribution company named Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). These two equity investments were formed as new business entities to collaborate with Shaanxi Pharmaceutical Group to expand sales to regional hospitals and clinics and to establish the presence of retail pharmacies under the Brand name “Sunsimiao”. The investments are accounted for using the equity method because Ankang Longevity Group has significant influence, but no control of these two entities. Ankang Longevity Group recorded income of US$ 140,582 and US$ 288,877 for the six months ended December 31, 2019 and 2018, respectively and recorded income of US$ 70,683 and US$ 145,742 for the three months ended December 31, 2019 and 2018, respectively, from the investments, which was included in “Income from equity method investments” in the unaudited condensed consolidated statements of income and comprehensive income (see Note 11).

Ankang Longevity Group entered into a supplemental agreement with Shaanxi Pharmaceutical Group. According to the supplemental agreement, new 49% equity investment companies established by Shaanxi Pharmaceutical Group and Ankang Longevity Group are required to exclusively purchase certain raw materials and drug products from Shaanxi Pharmaceutical Group. In return, Shaanxi Pharmaceutical Group has agreed to compensate Ankang Longevity Group with a purchase rebate of 7% of the total purchases made from Shaanxi Pharmaceutical Group. For the six months ended December 31, 2019 and 2018, a total of US$ Nil and US$ 517,626 was recognized by Ankang Longevity Group from this supplemental agreement in addition to its 49% share of the income from the equity investment companies, respectively. For the three months ended December 31, 2019, total income of US$ Nil was recognized by Ankang Longevity Group from this supplemental agreement, compared to US$ 225,187 in the same period in 2018.

On October 21, 2013, the Company, through its controlled subsidiaries, Zhisheng Freight and Zhisheng Agricultural, entered into an agreement with an unrelated third party, Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd. (“Zhen’Ai Network”), and invested RMB 14.5 million (approximately US$ 2.2 million) into Tiancang Systematic Warehousing project (“Tiancang Project”) operated by Zhen’Ai Network. The Tiancang Project is an online platform established to provide comprehensive warehousing and logistic solutions to companies involved in E-commerce. The Company is entitled to 29% of Tiancang Project’s after-tax net income annually, less 30% statutory reserve and a 10 % employee welfare fund contribution. When the amount of the accumulated statutory reserve reaches 30% of the total investment for the Tiancang Project, no additional appropriation to the statutory reserve is required. For the six and three months ended December 31, 2019 and 2018, the Company did not record investment income from this investment.

On November 21, 2016, the Company (the “Investor”) entered into an agreement with Original Lab Inc., a California corporation (the “Investee”), and made a payment of US$ 200,000 in exchange for the right to acquire certain shares of the Investee’s common and preferred stock. The Company considered it’s unlikely to obtain any investment income in the near future, and decided the make a fully impairment on this investment during the year ended June 30, 2019. 

The Company’s investments in unconsolidated entities consist of the following:

	December 31, 2019		June 30, 2019
Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (Ankang Longevity Pharmacy)	$	3,774,388	$	3,717,277
Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Chain Co., Ltd.		840,853		822,058
Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd.		2,080,942		2,111,609
Total	$	6,696,183	$	6,650,944

Summarized financial information of unconsolidated entities is as follows:

	December 31, 2019		June 30, 2019
Current assets	$	38,714,700	$	35,675,858
Noncurrent assets		220,420		241,580
Current liabilities		29,531,039		26,668,485

	For the six months ended December 31,
	2019		2018
Net sales	$	16,283,932	$	16,306,851
Gross profit		1,674,366		2,020,501
Income from operations		287,432		665,455
Net income		286,902		589,545

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Related Party Transactions

6 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 11 - RELATED PARTY TRANSACTIONS

DUE FROM RELATED PARTIES

The Company had previously made temporary advances to certain shareholders of the Company and to other entities that are either owned by family members of those shareholders or to other entities that the Company has investments in. Those advances are due on demand, non-interest bearing.

As of December 31, 2019 and June 30, 2019, the outstanding amounts due from related parties consist of the following:

	December 31, 2019		June 30, 2019
Yang Bin	$	43,054	$	43,688
Beijing Huiyinansheng Asset Management Co., Ltd (a.)		21,556		21,873
Beijing Shengguang Tianyi Clothing Co., Ltd (b.)		-		63,911
Wang Qiwei		58,124		58,981
	$	122,734	$	188,453

a. This Company is wholly owned by one of the Company’s senior management.

b. This Company is wholly owned by one of the Company’s shareholders.

DUE TO RELATED PARTIES

As of December 31, 2019 and June 30, 2019, the Company had related party payables of US$ 495,555 and US$ 234,500, respectively, mainly due to the principal shareholders or certain relatives of the shareholders of the Company who lend funds for the Company’s operations. The payables are unsecured, non-interest bearing and due on demand.

	December 31, 2019		June 30, 2019
Wu Yang	$	91,920	$	93,275
Wang Sai		8,611		8,738
Chen Jiping		-		989
Zhang Yuying		-		2,913
Zhou Guocong		11,481		-
Li Baolin		215,270		-
Zhao Min		168,273		128,585
	$	495,555	$	234,500

SALES TO RELATED PARTIES

For the six and three months ended December 31, 2019, the Company recorded sales to Shaanxi Pharmaceutical Group, a related party (see Note 7), of US$ 1,545,849 and US$ 750,301, respectively. For the six and three months ended December 31, 2018, the Company recorded sales to Shaanxi Pharmaceutical Group, a related party, of US$ 1,801,787 and US$ 998,877, respectively. As of December 31, 2019 and June 30, 2019, the balance of accounts receivable due from Shaanxi Pharmaceutical Group was US$ 2,054,466 and US$ 2,706,111, respectively.

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Summary of Significant Accounting Policies (Details) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Variable Interest Entity [Line Items]
Current assets	$ 57,539,496	$ 57,328,097
Other non-current assets	11,382,612	11,028,775
Total assets	77,484,310	77,322,543
Total liabilities	(5,301,117)	(6,090,955)
Net assets	72,183,193	71,231,588
Plant and equipment, net [Member]
Variable Interest Entity [Line Items]
Total assets	$ 8,562,202	$ 8,965,671

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Taxes (Tables)

6 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Schedule of components of the income tax expense

	For the six months ended December 31,						For the three months ended December 31,
	2019			2018			2019			2019
Current income tax provision	$	333,902		$	468,049		$	193,061		$	250,893
Deferred income tax benefit		(169,510	)		(23,903	)		(23,886	)		(25,530	)
Total	$	164,392		$	444,146		$	169,175		$	225,363

Schedule of financial reporting basis and tax basis of assets and liabilities

	December 31, 2019			June 30, 2019
Deferred tax assets:
Allowance for doubtful accounts	$	322,480		$	197,962
Inventory reserve		269,192			228,893
Net operating loss carry-forwards		512,124			519,671
Total		1,103,796			946,526
Valuation allowance		(512,124	)		(519,671	)
Total deferred tax assets		591,672			426,855
Deferred tax liability:
Distribution rights		(264,782	)		(268,684	)
Total deferred tax liability		(264,782	)		(268,684	)
Deferred tax assets, net	$	326,890		$	158,171

Schedule of movement of valuation allowance

	December 31, 2019			June 30, 2018
Beginning balance	$	519,671		$	539,061
Current year addition		-			-
Exchange difference		(7,547	)		(19,390	)
Ending balance	$	512,124		$	519,671

Schedule of taxes payable

	December 31, 2019		June 30, 2019
Income tax payable	$	3,422,879	$	3,425,080
Value added tax payable		542,600		536,486
Business tax and other taxes payable		7,478		5,909
Total		3,972,957		3,967,475
Less: current portion		3,347,354		3,341,872
Income tax payable - noncurrent portion	$	625,603	$	625,603

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Leases (Tables)

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

Schedule of operating lease related assets and liabilities

	December 31, 2019
Rights of use lease assets	$	3,105,286
		-
Operating lease liabilities – current	$	411,280
Operating lease liabilities – non-current		3,132
Total operating lease liabilities	$	414,412

Schedule of weighted average remaining lease terms and discount rates for operating leases

	December 31, 2019
Remaining lease term and discount rate:
Weighted average remaining lease term (years)		9.74
Weighted average discount rate		5.0	%

Schedule of maturities of lease liabilities

2020	$	735,163
2021		310,101
2022		209,689
2023		209,163
2024		209,163
Thereafter		1,439,177
Total lease payments		3,112,456
Less: imputed interest		(7,170	)
Less: prepayments		(2,690,874	)
Present value of lease liabilities	$	414,412

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Investments (Details Textual)	1 Months Ended	3 Months Ended		6 Months Ended
	Oct. 21, 2013 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2019 CNY (¥)	Jun. 30, 2019 USD ($)	Nov. 21, 2016 USD ($)	Oct. 21, 2013 CNY (¥)	Jul. 14, 2006
Investments (Textual)
Investor payments		$ 6,696,183		$ 6,696,183			$ 6,650,944
Percentage of ownership interest		49.00%		49.00%		49.00%				100.00%
Recorded income				$ 140,582	$ 288,877
Percentage of purchase distribution				49.00%
Income from equity method investments
Profit sharing on income, percentage				49.00%
Ankang Longevity Group [Member]
Investments (Textual)
Investor payments		$ 1,000,000		$ 1,000,000
Recorded income		$ 70,683	$ 145,742	$ 140,532	288,877
Ankang Longevity Group [Member] | RMB [Member]
Investments (Textual)
Investor payments | ¥						¥ 6,800,000
Tiancang Systematic Warehousing Project [Member]
Investments (Textual)
Investor payments	$ 2,200,000
Profit sharing on income, percentage	29.00%
Deductible statutory reserve, percentage	30.00%
Employee welfare fund, percentage	10.00%
Statutory reserve, percentage	30.00%
Tiancang Systematic Warehousing Project [Member] | RMB [Member]
Investments (Textual)
Investor payments | ¥									¥ 14,500,000
Sunsimiao Drugstores [Member] | Ankang Longevity Group [Member]
Investments (Textual)
Percentage of ownership interest		49.00%		49.00%		49.00%
Shaanxi Pharmaceutical Group [Member] | Ankang Longevity Group [Member]
Investments (Textual)
Percentage of purchase distribution				7.00%
Income from equity method investments			$ 225,187		$ 517,626
Original Lab Inc. [Member]
Investments (Textual)
Investor payments								$ 200,000

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Leases (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jul. 02, 2019	Jun. 30, 2019
Prepaid Leases (Textual)
Operating lease liability	$ 414,412		$ 414,412		$ 450,123
Lease term, description			Lease expense for lease payment is recognized on a straight-line basis over the lease term. Leases with initial term of 12 months or less are not recorded on the balance sheet.
Rent expense	109,003	$ 136,109	$ 201,328	$ 295,460
Right of use assets	$ 3,105,286		$ 3,105,286		$ 3,587,788
Maximum [Member]
Prepaid Leases (Textual)
Lease term			24 years
Minimum [Member]
Prepaid Leases (Textual)
Lease term			5 years

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Acquisition (Details 1) - USD ($)		6 Months Ended
		Dec. 31, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Preliminary Fair Value		$ 1,059,128	$ 1,074,736
Distribution Rights [Member] | Tianjin Tajite [Member]
Business Acquisition [Line Items]
Preliminary Fair Value		$ 1,059,128
Weighted Average Useful Life (in Years)	[1]	0 years

[1] The distribution rights with no expiration date has been determined to have an indefinite life.

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Commitments and Contigencies (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	May 16, 2017	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Commitments and Contigencies (Textual)
Sublease rental income		$ 51,111	$ 51,784	$ 102,420	$ 104,688
Damages amount	$ 6,000,000

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2019	Jun. 30, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per shares)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	27,333,428	22,871,772
Common stock, shares outstanding	27,333,428	22,871,772

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Organization and Nature of Operations

6 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND NATURE OF OPERATIONS

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Shineco, Inc. (“Shineco” or the “Company”) was incorporated in the State of Delaware on August 20, 1997. The Company is a holding company whose primary purpose is to develop business opportunities in the People’s Republic of China (“PRC” or “China”). 

On December 30, 2004, the Company acquired all of the issued and outstanding shares of Beijing Tenet-Jove Technological Development Co., Ltd. (“Tenet-Jove”), a PRC company, in exchange for restricted shares of the Company’s common stock, and the sole operating business of the Company became that of its subsidiary, Tenet-Jove. Tenet-Jove was incorporated on December 15, 2003 under the laws of China. Consequently, Tenet-Jove became a 100% owned subsidiary of Shineco and was officially granted the status of a Wholly Foreign-Owned Entity (“WFOE”) by Chinese authorities on July 14, 2006. This transaction was accounted for as a recapitalization. Tenet-Jove owns 90% interest of Tianjin Tenet Huatai Technological Development Co., Ltd. (“Tenet Huatai”).

On December 31, 2008, June 11, 2011 and May 24, 2012, Tenet-Jove entered into a series of contractual agreements including an Executive Business Cooperation Agreement, a Timely Reporting Agreement, an Equity Interest Pledge Agreement and Executive Option Agreement (collectively, the “VIE Agreements”), with each one of the following entities, Ankang Longevity Pharmaceutical (Group) Co., Ltd. (“Ankang Longevity Group”), Yantai Zhisheng International Freight Forwarding Co., Ltd. (“Zhisheng Freight”), Yantai Zhisheng International Trade Co., Ltd. (“Zhisheng Trade”), Yantai Mouping District Zhisheng Agricultural Produce Cooperative (“Zhisheng Agricultural”) and Qingdao Zhihesheng Agricultural Produce Services., Ltd. (“Qingdao Zhihesheng”). On February 24, 2014, Tenet-Jove entered into the same series of contractual agreements with Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. (“Zhisheng Bio-Tech”), which was incorporated in 2014. Zhisheng Bio-Tech, Zhisheng Freight, Zhisheng Trade, Zhisheng Agricultural, and Qingdao Zhihesheng are collectively referred to herein as the “Zhisheng Group”.

Pursuant to the VIE Agreements, Tenet-Jove has the exclusive right to provide to the Zhisheng  Group and Ankang Longevity Group consulting services related to their business operations and management. All the above contractual agreements obligate Tenet-Jove to absorb a majority of the risk of loss from the Zhisheng Group and Ankang Longevity Group’s activities and entitle Tenet-Jove to receive a majority of their residual returns. In essence, Tenet-Jove has gained effective control over the Zhisheng Group and Ankang Longevity Group. Therefore, the Zhisheng Group and Ankang Longevity Group are treated as Variable Interest Entities (“VIEs”) under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”. Accordingly, the accounts of these entities are consolidated with those of Tenet-Jove.

Since Shineco is effectively controlled by the majority shareholders of the Zhisheng Group and Ankang Longevity Group, Shineco owns 100% of Tenet-Jove. Accordingly, Shineco, Tenet-Jove, and its VIEs, the Zhisheng Group and Ankang Longevity Group are effectively controlled by the same majority shareholders. Therefore, Shineco, Tenet-Jove and its VIEs are considered under common control. The consolidation of Tenet-Jove and its VIEs into Shineco was accounted for at historical cost and prepared on the basis as if the aforementioned exclusive contractual agreements between Tenet-Jove and its VIEs had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.

On April 19, 2017, Tenet-Jove established Xinjiang Tiankunrunze Biological Engineering Co., Ltd. (“Tiankunrunze”) with registered capital of RMB 50.0 million (US$ 7,262,000) and owns 65% interest of Tiankunrunze. On April 28, 2017, Tiankunrunze established Xinjiang Tianzhuo Technology Development Co., Ltd. (“Tianzhuo”) with registered capital of RMB 10.0 million (US$ 1,450,233). On May 22, 2017, Tiankunrunze established Xinjiang Tianhuihechuang Agriculture Development Co., Ltd. (“Tianhuihechuang”) with registered capital of RMB 10.0 million (US$ 1,452,294). On May 23, 2017, Tiankunrunze established Xinjiang Tianxintongye Biotechnology Development Co., Ltd. (“Tianxintongye”) with registered capital of RMB 10.0 million (US$ 1,451,615). Therefore, Tenet-Jove controls Tiankunrunze and its wholly owned subsidiaries.

On May 2, 2017, the Company entered into a Strategic Cooperation Agreement with Beijing Zhongke Biorefinery Engineering Technology Co., Ltd. (“Biorefinery”), a leading high-tech biomass refining company financially backed by the Chinese Academy of Sciences Institute of Process Engineering, to establish the Institute of Chinese Apocynum Industrial Technology Research (“ICAITR”). Pursuant to the Strategic Cooperation Agreement the two parties agreed to establish the ICAITR, the Company and Biorefinery own 80% and 20% of the equity interests of ICAITR, respectively. Shineco invested RMB 5.0 million (US$ 737,745) as the registered capital, and Biorefinery will invest a technology patent named “Steam Explosion Degumming”.

On September 30, 2017, Tenet-Jove established Xinjiang Shineco Taihe Agriculture Technology Ltd. (“Xinjiang Taihe”) with registered capital of RMB 10.0 million (US$ 1,502,650). On September 30, 2017, Tenet-Jove established Xinjiang Tianyi Runze Bioengineering Co., Ltd. (“Runze”) with registered capital of RMB 10.0 million (US$ 1,502,650). Xinjiang Taihe and Runze became wholly-owned subsidiaries of Tenet-Jove.

On December 10, 2016, Tenet-Jove entered into a purchase agreement with Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), an online e-commerce company based in Tianjin, China, specializing in distributing Luobuma related products and branded products of Daiso 100-yen shops, pursuant to which Tenet-Jove would acquire a 51% equity interest in Tianjin Tajite for cash consideration of RMB 14,000,000 (approximately US$ 2.1 million). On December 25, 2016, the Company paid the full amount as the deposit to secure the deal. In May, 2017, the Company amended the agreement that required Tianjin Tajite to satisfy certain preconditions related to product introductions into China. On October 26, 2017, the Company completed the acquisition for 51% of the shares in Tianjin Tajite.

On October 27, 2017, the Company, through its subsidiary Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), obtained contractual rights to distribute branded products of Daiso Industries Co., Ltd. (“Daiso”), a large franchise of 100-yen shops founded in Japan, via JD.com (“JD”), one of the largest e-commerce companies and one of the largest retailers in China. On November 3, 2017, the Company further developed the cooperation with Daiso by entering into a supply and purchase agreement (the “Daiso Agreement”) for the purpose of establishing a continuous supply and sale of Daiso’s products in China. Pursuant to the Daiso Agreement, the Company planned to purchase Daiso Products in the amount of approximately RMB 20 million by August, 2018 and add orders as circumstance requires. The term of the Daiso Agreement is for one year, and it renews for an additional one-year at the end of each term unless terminated by written notice by either Tianjin Tajite or Daiso. Due to the policy of China Customs, many of the bestselling products of Daiso are not allowed to be imported through the general form of trade model, but only through cross-border e-commence business model. As a result, the Company and Daiso agreed to suspend the cooperation temporarily and wait for the opening of the China-Japan-South Korea Free Trade Zone.

On November 1, 2017, the Company established an Apocynum Industrial Park in Xinjiang, China. The industrial park is focusing on planting and purchasing Bluish Dogbane, processing and distributing Bluish Dogbane preliminary products.

On March 13, 2019, Tenet-Jove established Beijing Tenjove Newhemp Biotechnology Co., Ltd. (“TNB”) with registered capital of RMB 10.0 million (US$ 1,502,650). TNB became a wholly-owned subsidiary of Tenet-Jove. 

The business operation of Tiankunrunze and its wholly owned subsidiaries was ceased in July 2019. 

On August 22, 2019, Tenet-Jove established Shineco Zhong Hemp Group Co., Ltd. (“Zhong Hemp”) with registered capital of RMB 200.0 million (US$ 28,237,022) and owns 60% interest of Zhong Hemp.

The Company, its subsidiaries, its VIEs and its VIEs’ subsidiaries (collectively the “Group”) operate three main business segments: 1) Tenet-Jove is engaged in manufacturing and selling of Bluish Dogbane and related products, also known in Chinese as “Luobuma”, including therapeutic clothing and textile products made from Luobuma; 2) Zhisheng Group is engaged in the business of planting, processing and distributing of green agricultural produce as well as providing domestic and international logistic services for agricultural products (“Agricultural Products”); and, 3) Ankang Longevity Group manufactures traditional Chinese medicinal herbal products as well as other retail pharmaceutical products. These different business activities and products can potentially be integrated and benefit from one another.

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Shareholders' Equity (Details) - USD ($)	1 Months Ended					6 Months Ended
	Sep. 05, 2019	Sep. 03, 2019	Sep. 27, 2018	Jan. 23, 2018	Sep. 28, 2016	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Shareholders' Equity (Textual)
Statutory surplus reserve percentage						10.00%
Registered capital reserve						50.00%
Statutory reserves						$ 4,198,107		$ 4,198,107
Initial public offering, share	2,798,792
Common stock at a price	$ 0.52	$ 0.615
Net proceeds	$ 1,500,203					2,522,863	$ 1,589,892
Common stock purchase agreement description				The Company had the right, from time to time in its sole discretion during the 24-month term of the Purchase Agreement, to direct IFG Fund to purchase up to a total of US$ 15,000,000 worth of shares of common stock. As consideration for IFG Fund to enter into the Purchase Agreement, the Company agreed to issue 200,000 shares of the Company’s Common Stock (the “Commitment Shares”) to IFG Fund. The Purchase Shares are being offered in an indirect primary offering consisting of an equity line of credit, in accordance with the terms and conditions of the Purchase Agreement. The total number of Purchase Shares shall not exceed 4,000,000. On January 23, 2018, the Company issued the Commitment Shares to IFG Fund. On July 3, 2018, the Company and IFG Fund entered into a termination agreement, dated July 3, 2018 (the “Termination Agreement”) effective as of July 3, 2018, to terminate the Purchase Agreement and the Registration Rights Agreement. IFG retained the 200,000 commitment shares which were valued at US$ 434,000 and written off during the six months ended September 30, 2018.
Granted restricted shares		1,662,864
Restricted shares issued for management		$ 1,022,661				$ 1,022,661
IPO [Member]
Shareholders' Equity (Textual)
Initial public offering, share			1,637,700		1,713,190
Proceeds from initial public offering, net of offering costs			$ 1,589,892		$ 5,400,000
Common stock at a price			$ 1		$ 4.50
Net proceeds			$ 1,637,700		$ 7,700,000
Private Placement [Member]
Shareholders' Equity (Textual)
Smart Contracts, Description						The minimum target amount in this private placement is $1,000,000.Once Shineco raises $1,000,000, investors will have the option to convert smart contracts that represent preferred stock into Shinceo's common stock. For this, smart contracts that shall be convertible into common stock at the following ratio of 20:1. If Shineco raises $1,000,000 in this private placement, then up to 500,000 shares of common stock will be issued pursuant to the following calculation if the smart contract holders choose to convert their smart contracts that represent preferred stock into Shinceo's common stock:   1. Each smart contract is $ 0.1;   2. $1,000,000 can get 10,000,000 smart contracts. ($1,000,000 divided by 0.1 equals to 10,000,000 smart contracts.)   3. The conversion ratio of smart contracts to common stock is 20:1   4. Therefore,-10,000,000-smart-contracts-divided by 20 -equals-500,000-common stock.   Shineco plans to issue no more than 4,000,000 shares in connection with this transaction, specifically for the exchange of smart contracts.

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Related Party Transactions (Details) - USD ($)		Dec. 31, 2019	Jun. 30, 2019
Related Party Transaction [Line Items]
Due from related parties		$ 122,734	$ 188,453
Yang Bin [Member]
Related Party Transaction [Line Items]
Due from related parties		43,054	43,688
Beijing Huiyinansheng Asset Management Co., Ltd [Member]
Related Party Transaction [Line Items]
Due from related parties	[1]	21,556	21,873
Beijing Shengguang Tianyi Clothing Co., Ltd [Member]
Related Party Transaction [Line Items]
Due from related parties	[2]		63,911
Wang Qiwei [Member]
Related Party Transaction [Line Items]
Due from related parties		$ 58,124	$ 58,981

[1] This Company is wholly owned by one of the Company's senior management.

[2] This Company is wholly owned by one of the Company's shareholders.

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Taxes (Details 1) - USD ($)	Dec. 31, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Deferred tax assets:
Allowance for doubtful accounts	$ 322,480	$ 197,962
Inventory reserve	269,192	228,893
Net operating loss carry-forwards	512,124	519,671
Total	1,103,796	946,526
Valuation allowance	(512,124)	(519,671)	$ (519,671)	$ (539,061)
Total deferred tax assets	591,672	426,855
Deferred tax liability:
Distribution rights	(264,782)	(268,684)
Total deferred tax liability	(264,782)	(268,684)
Deferred tax assets, net	$ 326,890	$ 158,171

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Land Use Rights (Details 1) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Twelve months ending September 30:
2020	$ 31,926
2021	31,926
2022	31,926
2023	31,926
2024	31,926
Thereafter	1,070,062
Total	$ 1,229,692	$ 1,264,309

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Property and Equipment (Details) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 15,867,992	$ 16,446,107
Less: accumulated depreciation and amortization	(5,918,767)	(5,778,377)
Property and equipment, net	9,949,225	10,667,730
Buildings [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	11,693,729	11,994,407
Building improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross		79,628
Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	873,174	930,109
Motor vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	47,320	81,541
Construction in progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross		78,407
Office equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	235,834	219,605
Farmland leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 3,017,935	$ 3,062,410

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Subsequent Events

6 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 17 - SUBSEQUENT EVENTS

These unaudited condensed consolidated financial statements were approved by management and available for issuance on February XX, 2019, and the Company has evaluated subsequent events through this date. No subsequent events required adjustments to or disclosure in these unaudited condensed consolidated financial statements. 

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Property and Equipment (Tables)

6 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

	December 31, 2019			June 30, 2019
Buildings	$	11,693,729		$	11,994,407
Building improvements		-			79,628
Machinery and equipment		873,174			930,109
Motor vehicles		47,320			81,541
Construction in progress		-			78,407
Office equipment		235,834			219,605
Farmland leasehold improvements		3,017,935			3,062,410
		15,867,992			16,446,107
Less: accumulated depreciation and amortization		(5,918,767	)		(5,778,377	)
Property and equipment, net	$	9,949,225		$	10,667,730

Schedule of farmland leasehold improvements

	December 31, 2019		June 30, 2019
Blueberry farmland leasehold improvements	$	2,318,512	$	2,352,679
Yew tree planting base reconstruction		259,759		263,587
Greenhouse renovation		439,664		446,144
Total farmland leasehold improvements	$	3,017,935	$	3,062,410

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Segment Reporting (Tables)

6 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Schedule of information by segment

	For the six months ended December 31, 2019
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	138,759		$	6,839,600		$	7,937,034		$	14,915,393
Cost of revenue and related business and sales tax		269,157			5,227,120			5,414,234			10,910,511
Gross profit		(130,398	)		1,612,480			2,522,800			4,004,882
Gross profit %		(94.0	)%		23.6	%		31.8	%		26.9	%

	For the six months ended December 31, 2018
	Bluish			Herbal			Other agricultural
	dogbane			products			products			Total
Segment revenue	$	510,724		$	6,797,904		$	8,662,385		$	15,971,013
Cost of revenue and related business and sales tax		221,786			5,154,956			6,083,265			11,460,007
Gross profit		288,938			1,642,948			2,579,120			4,511,006
Gross profit %		56.6	%		24.2	%		29.8	%		28.2	%

	For the three months ended December 31, 2019
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	73,240		$	3,539,279		$	4,256,093		$	7,868,612
Cost of revenue and related business and sales tax		37,653			2,627,716			2,838,256			5,503,625
Gross profit		35,587			911,563			1,417,837			2,364,987
Gross profit %		48.6	%		25.8	%		33.3	%		30.1	%

	For the three months ended December 31, 2018
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	344,539		$	3,499,581		$	4,537,812		$	8,381,932
Cost of revenue and related business and sales tax		167,357			2,580,690			3,233,806			5,981,853
Gross profit		177,182			918,891			1,304,006			2,400,079
Gross profit %		51.4	%		26.3	%		28.7	%		28.6	%

	December 31, 2019		June 30, 2019
Luobuma products	$	4,971,200	$	6,268,974
Herbal products		46,125,282		45,095,019
Other agricultural products		31,976,226		32,375,480
	$	83,072,708	$	83,739,473

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Acquisition (Tables)

6 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Schedule of estimated fair values of net assets acquired and liabilities assumed

Accounts receivable, net		26,635
Inventory		57,275
Other current assets		182,056
Distribution rights		1,059,128
Property, plant and equipment		13,865
Advance from customers		(77,127	)
Tax payable		(16,648	)
Deferred tax liabilities		(264,782	)
Salary payable		(24,755	)
Accrued liabilities and other current liabilities		(980,277	)
Non-controlling interest		1,406
Goodwill		2,010,649
Total purchase price for acquisition, net of US$ 21,761 of cash	$	1,987,425

Schedule of estimated useful lives

	Preliminary Fair Value		Weighted Average Useful Life (in Years)
Distribution rights	$	1,059,128	(a)

(a) The distribution rights with no expiration date has been determined to have an indefinite life.

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Shareholders' Equity

6 Months Ended

Dec. 31, 2019

Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 13 - SHAREHOLDERS' EQUITY

Initial Public Offering

On September 28, 2016, the Company completed its initial public offering of 1,713,190 shares of common stock at a price of US$ 4.50 per share for gross proceeds of US$ 7.7 million and net proceeds of approximately US$ 5.4 million. The Company's common shares began trading on September 28, 2016 on the NASDAQ Capital Market under the symbol "TYHT." 

Statutory Reserve

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC ("PRC GAAP").

Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities' registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. As of December 31, 2019 and June 30, 2019, the balance of the required statutory reserves was US$ 4,198,107 and US$ 4,198,107, respectively.

On January 23, 2018, Shineco, Inc. entered into a Common Stock Purchase Agreement ("Purchase Agreement") with IFG Opportunity Fund LLC ("IFG Fund") whereby, upon the terms and subject to the conditions and limitations set forth therein, the Company had the right, from time to time in its sole discretion during the 24-month term of the Purchase Agreement, to direct IFG Fund to purchase up to a total of US$ 15,000,000 worth of shares of common stock. As consideration for IFG Fund to enter into the Purchase Agreement, the Company agreed to issue 200,000 shares of the Company's Common Stock (the "Commitment Shares") to IFG Fund. The Purchase Shares are being offered in an indirect primary offering consisting of an equity line of credit, in accordance with the terms and conditions of the Purchase Agreement. The total number of Purchase Shares shall not exceed 4,000,000. On January 23, 2018, the Company issued the Commitment Shares to IFG Fund. On July 3, 2018, the Company and IFG Fund entered into a termination agreement, dated July 3, 2018 (the "Termination Agreement") effective as of July 3, 2018, to terminate the Purchase Agreement and the Registration Rights Agreement. IFG retained the 200,000 commitment shares which were valued at US$ 434,000 and written off during the six months ended September 30, 2018.

On September 27, 2018, the Company entered into a securities purchase agreement with selected investors whereby the Company agreed to sell up to 1,637,700 of common stock at a purchase price of US$ 1 per share, for gross proceeds to the Company of approximately US$ 1,637,700 (the "2018 Offering"). After deducting the offering cost, the net proceeds the Company received was US$ 1,589,892. The 2018 Offering closed on September 28, 2018. The 2018 Offering was made pursuant to the Company's effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.

On May 8, 2019, TNB, filed with the United States Securities and Exchange Commission a Notice of Exempt Offering of Securities on Form D regarding an offering ("Offering") of simple agreement for future tokens. Tenet-Jove intends to use the net proceeds from sales of the tokens to develop land and facilities for cultivating industrial hemp in China under a newly formed wholly owned subsidiary (the "Operations"). The minimum target amount in this private placement is $1,000,000. Once Shineco raises $1,000,000, investors will have the option to convert smart contracts that represent preferred stock into Shinceo's common stock. For this, smart contracts that shall be convertible into common stock at the following ratio of 20:1. If Shineco raises $1,000,000 in this private placement, then up to 500,000 shares of common stock will be issued pursuant to the following calculation if the smart contract holders choose to convert their smart contracts that represent preferred stock into Shinceo's common stock:

1. Each smart contract is $ 0.1;

2. $1,000,000 can get 10,000,000 smart contracts. ($1,000,000 divided by 0.1 equals to 10,000,000 smart contracts.)

3. The conversion ratio of smart contracts to common stock is 20:1

4. Therefore,-10,000,000-smart-contracts-divided by 20 -equals-500,000-common stock.

Shineco plans to issue no more than 4,000,000 shares in connection with this transaction, specifically for the exchange of smart contracts.

On September 3, 2019, the Company granted 1,662,864 restricted shares to its employees as compensation cost for awards. The fair value of the restricted shares was US$ 1,022,661 based on the closing stock price US$ 0.615 at September 3, 2019. These restricted shares were vested immediately from the grant date. 

On September 5, 2019, the Company entered into a securities purchase agreement with select investors whereby the Company agreed to sell, and the investors agreed to purchase, up to 2,798,792 shares of common stock (the "Shares") at a purchase price of US$ 0.52 per Share. The net proceeds that the Company received was US$ 1,500,203. The offering is being made pursuant to the Company's effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.

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Land Use Rights

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

LAND USE RIGHTS

NOTE 5 - LAND USE RIGHTS

Land use rights are recognized at cost less accumulated amortization. According to the Chinese laws and regulations regarding land use rights, land in urban districts is owned by the State, while land in the rural areas and suburban areas, except otherwise provided for by the State, is collectively owned by individuals designated as resident farmers by the State. However, in accordance with the legal principle that land ownership is separate from the right to the use of the land, the government grants the user a “land use right” (the “Right”) to use the land. The Company has the Right to use the land for 50 years and amortizes the rights on a straight-line basis over the period of 50 years. 

	December 31, 2019			June 30, 2019
Land use rights	$	1,596,295		$	1,619,820
Less: accumulated amortization		(366,603	)		(355,511	)
Land use rights, net	$	1,229,692		$	1,264,309

For the six months ended December 31, 2019 and 2018, the Company recognized amortization expense of US$ 18,427 and US$ 19,072, respectively. For the three months ended December 31, 2019 and 2018, the Company recognized amortization expense of US$ 9,213 and US$ 9,434, respectively.

The estimated future amortization expenses are as follows:

Twelve months ending December 31:
2020	$	31,926
2021		31,926
2022		31,926
2023		31,926
2024		31,926
Thereafter		1,070,062
Total	$	1,229,692

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Short-Term Loans

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

SHORT-TERM LOANS

NOTE 9 - SHORT-TERM LOANS

Short-term loans consist of the following:

Lender	December 31, 2019		Maturity Date	Int. Rate/Year
Agricultural Bank of China-c		1,435,132	2020-2-25		5.66	%
Agricultural Bank of China-c		287,027	2020-8-26		5.60	%
Total	$	1,722,159

Lender	June 30, 2019		Maturity Date		Int. Rate/Year
MY Bank-a		7,282	2019-8-29	*		15.80	%
Agricultural Bank of China-b		291,256	2019-8-12	*		5.66	%
Agricultural Bank of China-b		655,327	2019-11-13			3.92	%
Agricultural Bank of China-c		1,456,282	2020-2-25			5.66	%
Total	$	2,410,147

The loans outstanding were guaranteed by the following properties, entities or individuals: 

a. Not collateralized or guaranteed.

b. Guaranteed by a commercial credit guaranty company, unrelated to the Company and also by Jiping Chen, a shareholder of the Company.

c. Collateralized by the building owned by Xiaoyan Chen and Jing Chen, who are both related parties of the Company. Xiaoyan Chen is one of the shareholders of Ankang Longevity Group. Jing Chen is the sister of the Xiaoyan Chen but not a shareholder of Ankang Longevity Group.

* The Company repaid the loan in full on maturity date.

The Company recorded interest expense of US$ 58,266 and US$ 58,544 for the six months ended December 31, 2019 and 2018, respectively. The annual weighted average interest rates are 5.32% and 5.74% for the six months ended December 31, 2019 and 2018, respectively.

The Company recorded interest expense of US$ 27,989 and US$ 27,172 for the three months ended December 31, 2019 and 2018, respectively. The annual weighted average interest rates are 5.52% and 5.77% for the three months ended December 31, 2019 and 2018, respectively.

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Concentrations and Risks (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Concentration and Risks (Textual)
Cash balance	$ 42,087,793		$ 42,087,793		$ 35,330,676
Total sales [Member] | Customer Four [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	10.00%		10.00%
Total sales [Member] | Customer One [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	12.00%	15.00%	13.00%	14.00%
Total sales [Member] | Customer Two [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	10.00%	12.00%	11.00%	11.00%
Total sales [Member] | Customer Three [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	10.00%		10.00%	11.00%
Total sales [Member] | Customer Four [Member]
Concentration and Risks (Textual)
Concentration risk, percentage				11.00%
Total sales [Member] | Customer Five [Member]
Concentration and Risks (Textual)
Concentration risk, percentage				11.00%
Total purchases [Member] | Vendor One [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	45.00%	28.00%	41.00%	45.00%
Total purchases [Member] | Vendor Two [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	13.00%		14.00%	15.00%
Total purchases [Member] | Vendor Three [Member]
Concentration and Risks (Textual)
Concentration risk, percentage				10.00%
Accounts Receivable [Member] | Customer One [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	70.00%
Accounts Receivable [Member] | Customer Two [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	70.00%
Accounts Receivable [Member] | Customer Three [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	70.00%
Accounts Receivable [Member] | Customer Four [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	70.00%
Accounts Receivable [Member] | Customer Five [Member]
Concentration and Risks (Textual)
Concentration risk, percentage	70.00%
China [Member]
Concentration and Risks (Textual)
Cash balance	$ 42,070,119		$ 42,070,119		$ 35,311,106
China [Member] | Assets, Total [Member]
Concentration and Risks (Textual)
Concentration risk, percentage			100.00%	100.00%

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Leases (Details 1)	Dec. 31, 2019
Remaining lease term and discount rate:
Weighted average remaining lease term (years)	9 years 8 months 26 days
Weighted average discount rate	5.00%

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Short-Term Loans (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Short-Term Loans (Textual)
Interest expense	$ 27,989	$ 27,172	$ 58,266	$ 58,544
Weighted average interest rate	5.52%	5.77%	5.32%	5.74%

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Organization and Nature of Operations (Details)					6 Months Ended
	Aug. 22, 2019	Mar. 13, 2019	May 02, 2017	Dec. 10, 2016 USD ($)	Dec. 31, 2019 Segments	Oct. 26, 2017	Sep. 30, 2017 USD ($)	Sep. 30, 2017 CNY (¥)	May 23, 2017 USD ($)	May 23, 2017 CNY (¥)	May 22, 2017 USD ($)	May 22, 2017 CNY (¥)	Apr. 28, 2017 USD ($)	Apr. 28, 2017 CNY (¥)	Apr. 19, 2017 USD ($)	Apr. 19, 2017 CNY (¥)	Dec. 31, 2016 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 10, 2016 CNY (¥)	Jul. 14, 2006	Dec. 30, 2004
Organization and Nature of Operations (Textual)
Percentage of interest ownership					49.00%															100.00%
Business acquisition interest, percentage						51.00%
Tenet-Jove [Member]
Organization and Nature of Operations (Textual)
Majority interest ownership percentage					100.00%
Number of segments | Segments					3
Xinjiang Taihe [Member]
Organization and Nature of Operations (Textual)
Registered capital | $							$ 1,502,650
Xinjiang Taihe [Member] | RMB [Member]
Organization and Nature of Operations (Textual)
Registered capital | ¥								¥ 10,000,000
Runze [Member]
Organization and Nature of Operations (Textual)
Registered capital | $							$ 1,502,650
Runze [Member] | RMB [Member]
Organization and Nature of Operations (Textual)
Registered capital | ¥								¥ 10,000,000
Tianxintongye [Member]
Organization and Nature of Operations (Textual)
Registered capital | $									$ 1,451,615
Tianxintongye [Member] | RMB [Member]
Organization and Nature of Operations (Textual)
Registered capital | ¥										¥ 10,000,000
Tianhuihechuang [Member]
Organization and Nature of Operations (Textual)
Registered capital | $											$ 1,452,294
Tianhuihechuang [Member] | RMB [Member]
Organization and Nature of Operations (Textual)
Registered capital | ¥												¥ 10,000,000
Tianzhuo [Member]
Organization and Nature of Operations (Textual)
Registered capital | $													$ 1,450,233
Tianzhuo [Member] | RMB [Member]
Organization and Nature of Operations (Textual)
Registered capital | ¥														¥ 10,000,000
Tiankunrunze [Member]
Organization and Nature of Operations (Textual)
Percentage of interest ownership															65.00%	65.00%
Registered capital | $															$ 7,262,000
Tiankunrunze [Member] | RMB [Member]
Organization and Nature of Operations (Textual)
Registered capital | ¥																¥ 50,000,000
Tenet Huatai Technological Development Co., Ltd. [Member]
Organization and Nature of Operations (Textual)
Percentage of interest ownership																					90.00%
Tianjin Tajite [Member]
Organization and Nature of Operations (Textual)
Majority interest ownership percentage				51.00%															51.00%
Registered capital | $																	$ 2,100,000
Equity interest acquire, cash consideration amount | $				$ 2,100,000
Description of business combination				Tenet-Jove would acquire a 51% equity interest in Tianjin Tajite for cash consideration of RMB 14,000,000 (approximately US$ 2.1 million). On December 25, 2016, the Company paid the full amount as the deposit to secure the deal. In May, 2017, the Company amended the agreement that required Tianjin Tajite to satisfy certain preconditions related to product introductions into China. On October 26, 2017, the Company completed the acquisition for 51% of the shares in Tianjin Tajite.
Business acquisition interest, percentage				51.00%															51.00%
Tianjin Tajite [Member] | RMB [Member]
Organization and Nature of Operations (Textual)
Registered capital | ¥																		¥ 14,000,000
Equity interest acquire, cash consideration amount | ¥																			¥ 14,000,000
Biorefinery Engineering Technology Co., Ltd [Member]
Organization and Nature of Operations (Textual)
Description of business combination			Pursuant to the Strategic Cooperation Agreement the two parties agreed to establish the ICAITR, the Company and Biorefinery own 80% and 20% of the equity interests of ICAITR, respectively. Shineco invested RMB 5.0 million (US$ 737,745) as the registered capital, and Biorefinery will invest a technology patent named "Steam Explosion Degumming".
Beijing Tenjove Newhemp Biotechnology Co., Ltd [Member]
Organization and Nature of Operations (Textual)
Description of business combination		Tenet-Jove established Beijing Tenjove Newhemp Biotechnology Co., Ltd. ("TNB") with registered capital of RMB 10.0 million (US$ 1,502,650). TNB became a wholly-owned subsidiary of Tenet-Jove.
Tenet-Jove established Shineco Zhong Hemp Group Co., Ltd [Member]
Organization and Nature of Operations (Textual)
Description of business combination	Tenet-Jove established Shineco Zhong Hemp Group Co., Ltd. (“Zhong Hemp”) with registered capital of RMB 200.0 million (US$ 28,237,022) and owns 60% interest of Zhong Hemp.

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Related Party Transactions (Tables)

6 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Schedule of outstanding amounts due from related parties

	December 31, 2019		June 30, 2019
Yang Bin	$	43,054	$	43,688
Beijing Huiyinansheng Asset Management Co., Ltd (a.)		21,556		21,873
Beijing Shengguang Tianyi Clothing Co., Ltd (b.)		-		63,911
Wang Qiwei		58,124		58,981
	$	122,734	$	188,453

a. This Company is wholly owned by one of the Company’s senior management.

b. This Company is wholly owned by one of the Company’s shareholders.

Schedule of due to related parties

	December 31, 2019		June 30, 2019
Wu Yang	$	91,920	$	93,275
Wang Sai		8,611		8,738
Chen Jiping		-		989
Zhang Yuying		-		2,913
Zhou Guocong		11,481		-
Li Baolin		215,270		-
Zhao Min		168,273		128,585
	$	495,555	$	234,500

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Property and Equipment

6 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

	December 31, 2019			June 30, 2019
Buildings	$	11,693,729		$	11,994,407
Building improvements		-			79,628
Machinery and equipment		873,174			930,109
Motor vehicles		47,320			81,541
Construction in progress		-			78,407
Office equipment		235,834			219,605
Farmland leasehold improvements		3,017,935			3,062,410
		15,867,992			16,446,107
Less: accumulated depreciation and amortization		(5,918,767	)		(5,778,377	)
Property and equipment, net	$	9,949,225		$	10,667,730

Depreciation and amortization expense charged to operations was US$ 419,958 and US$ 307,772 for the six months ended December 31, 2019 and 2018, respectively. Depreciation and amortization expense charged to operations was US$ 241,743 and US$ 120,920 for the three months ended December 31, 2019 and 2018, respectively.  

Farmland leasehold improvements consist of following:

	December 31, 2019		June 30, 2019
Blueberry farmland leasehold improvements	$	2,318,512	$	2,352,679
Yew tree planting base reconstruction		259,759		263,587
Greenhouse renovation		439,664		446,144
Total farmland leasehold improvements	$	3,017,935	$	3,062,410

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Leases

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

LEASES

NOTE 8 - LEASES

Effective July 1, 2019, the Company adopted the new lease accounting standard using the optional transition method which allowed us to continue to apply the guidance under the lease standard in effect at the time in the comparative periods presented. In addition, the Company elected the package of practical expedients, which allowed us to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company has also elected the practical expedient allowing us to not separate the lease and non-lease components for all classes of underlying assets. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities of $3,587,788 and $450,123, respectively, as of July 1, 2019 with no impact on accumulated deficit. Financial position for reporting periods beginning on or after July 1, 2019, are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance.

The Company leases offices space under non-cancelable operating leases, with terms ranging from one to three years. In addition, one of the Company’s controlled subsidiaries, Zhisheng Group entered into several farmland lease contracts with farmer cooperatives to lease farmland in order to plant and grow organic vegetables, fruit and Chinese yew trees. The lease terms vary from 5 years to 24 years. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term. Leases with initial term of 12 months or less are not recorded on the balance sheet. 

When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The table below presents the operating lease related assets and liabilities recorded on the balance sheets. 

	December 31, 2019
Rights of use lease assets	$	3,105,286
		-
Operating lease liabilities – current	$	411,280
Operating lease liabilities – non-current		3,132
Total operating lease liabilities	$	414,412

The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of December 31, 2019:

	December 31, 2019
Remaining lease term and discount rate:
Weighted average remaining lease term (years)		9.74
Weighted average discount rate		5.0	%

Rent expense totaled US$ 201,328 and US$ 295,460 for the six months ended December 31, 2019 and 2018, respectively. Rent expense totaled US$ 109,003 and US$ 136,109 for the three months ended December 31, 2019 and 2018, respectively.

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2019:

2020	$	735,163
2021		310,101
2022		209,689
2023		209,163
2024		209,163
Thereafter		1,439,177
Total lease payments		3,112,456
Less: imputed interest		(7,170	)
Less: prepayments		(2,690,874	)
Present value of lease liabilities	$	414,412

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Taxes

6 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

TAXES

NOTE 12 - TAXES

(a) Corporate Income Taxes

The Company is subject to income taxes on an entity basis on income arising in or derived from the location in which each entity is domiciled.

Shineco is incorporated in the United States and has no operating activities. Tenet-Jove and its VIEs entities are governed by the Income Tax Laws of the PRC, and are currently subject to tax at a statutory rate of 25% on taxable income. Two VIE entities and Xinjiang Taihe receive a full income tax exemption from the local tax authority of the PRC as agricultural enterprises as long as the favorable tax policy remains unchanged.

On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted, The Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to re-measure the Company’s income tax liability and record an estimated income tax expense of US$ 744,766 for the year ended June 30, 2018. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of the Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2019 when the analysis is complete. The Company elects to pay the transition tax over an eight year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).

i) The components of the income tax expense (benefit) are as follows:

	For the six months ended December 31,						For the three months ended December 31,
	2019			2018			2019			2019
Current income tax provision	$	333,902		$	468,049		$	193,061		$	250,893
Deferred income tax benefit		(169,510	)		(23,903	)		(23,886	)		(25,530	)
Total	$	164,392		$	444,146		$	169,175		$	225,363

ii) The following table summarizes deferred tax assets resulting from differences between the financial reporting basis and tax basis of assets and liabilities:

	December 31, 2019			June 30, 2019
Deferred tax assets:
Allowance for doubtful accounts	$	322,480		$	197,962
Inventory reserve		269,192			228,893
Net operating loss carry-forwards		512,124			519,671
Total		1,103,796			946,526
Valuation allowance		(512,124	)		(519,671	)
Total deferred tax assets		591,672			426,855
Deferred tax liability:
Distribution rights		(264,782	)		(268,684	)
Total deferred tax liability		(264,782	)		(268,684	)
Deferred tax assets, net	$	326,890		$	158,171

Movement of the valuation allowance:

	December 31, 2019			June 30, 2018
Beginning balance	$	519,671		$	539,061
Current year addition		-			-
Exchange difference		(7,547	)		(19,390	)
Ending balance	$	512,124		$	519,671

(b) Value Added Tax

The Company is subject to a value added tax (“VAT”) for selling merchandise. The applicable VAT rate is 17% before May 1, 2018 for products sold in the PRC and decreased to 16% thereafter, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under commercial practice in the PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued.

In the event that the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty based on the amount of the taxes which are determined to be late or deficient, and will be expensed in the period if and when a determination is made by the tax authorities. There were no assessed penalties during the six and three months ended December 31, 2019 and 2018.

(c) Taxes Payable

Taxes payable consists of the following:

	December 31, 2019		June 30, 2019
Income tax payable	$	3,422,879	$	3,425,080
Value added tax payable		542,600		536,486
Business tax and other taxes payable		7,478		5,909
Total		3,972,957		3,967,475
Less: current portion		3,347,354		3,341,872
Income tax payable - noncurrent portion	$	625,603	$	625,603

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Commitments and Contigencies (Details)	Dec. 31, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2020	$ 85,350
Total	$ 85,350

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Leases (Details) - USD ($)	Dec. 31, 2019	Jul. 02, 2019	Jun. 30, 2019
Leases [Abstract]
Rights of use lease assets	$ 3,105,286	$ 3,587,788
Operating lease liabilities - current	411,280
Operating lease liabilities - non-current	3,132
Total operating lease liabilities	$ 414,412	$ 450,123

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Short-Term Loans (Details) - USD ($)		6 Months Ended	12 Months Ended
		Dec. 31, 2019	Jun. 30, 2019
Short-term loans, Total		$ 1,722,159	$ 2,410,147
MY Bank [Member]
Short-term loans, Total	[1]		$ 7,282
Maturity Date	[1],[2]		Aug. 29, 2019
Int. Rate/Year	[1]		15.80%
Agricultural Bank of China [Member]
Short-term loans, Total	[3]		$ 291,256
Maturity Date	[2],[3]		Aug. 12, 2019
Int. Rate/Year	[3]		5.66%
Agricultural Bank of China one [Member]
Short-term loans, Total	[3]		$ 655,327
Maturity Date	[3]		Nov. 13, 2019
Int. Rate/Year	[3]		3.92%
Agricultural Bank of China [Member]
Short-term loans, Total	[4]	$ 1,435,132	$ 1,456,282
Maturity Date	[4]	Feb. 25, 2020	Feb. 25, 2020
Int. Rate/Year	[4]	5.66%	5.66%
Agricultural Bank of China one [Member]
Short-term loans, Total	[4]	$ 287,027
Maturity Date	[4]	Aug. 26, 2020
Int. Rate/Year	[4]	5.60%

[1] Not collateralized or guaranteed.

[2] The Company repaid the loan in full on maturity date.

[3] Guaranteed by a commercial credit guaranty company, unrelated to the Company and also by Jiping Chen, a shareholder of the Company.

[4] Collateralized by the building owned by Xiaoyan Chen and Jing Chen, who are both related parties of the Company. Xiaoyan Chen is one of the shareholders of Ankang Longevity Group. Jing Chen is the sister of the Xiaoyan Chen but not a shareholder of Ankang Longevity Group.

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Acquisition (Details Textual) - Tianjin Tajite [Member]	6 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 12, 2016
Acquisition (Textual)
Acquire equity interest percentage				51.00%
Payment of acquisition		$ 2,100,000
Total purchase price for acquisition, net of cash	$ 21,761
RMB [Member]
Acquisition (Textual)
Payment of acquisition | ¥			¥ 14,000,000

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Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Current income tax provision	$ 193,061	$ 250,893	$ 333,902	$ 468,049
Deferred income tax provision (benefit)	(23,886)	(25,530)	(169,510)	(23,903)
Total	$ 169,175	$ 225,363	$ 164,392	$ 444,146

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Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2019	Jun. 30, 2019
CURRENT ASSETS:
Cash	$ 42,087,793	$ 35,330,676
Accounts receivable, net	9,689,266	9,683,074
Due from related parties	122,734	188,453
Inventories	2,618,043	2,215,559
Advances to suppliers, net	4,316,821	11,833,994
Other current assets	1,771,627	1,710,619
TOTAL CURRENT ASSETS	60,606,284	60,962,375
Property and equipment, net	9,949,225	10,667,730
Land use right, net of accumulated amortization	1,229,692	1,264,309
Investments	6,696,183	6,650,944
Distribution rights	1,059,128	1,074,736
Long-term deposit and other noncurrent assets	100,020	103,864
Right of use assets	3,105,286
Prepaid leases		2,857,344
Deferred tax assets	326,890	158,171
TOTAL ASSETS	83,072,708	83,739,473
CURRENT LIABILITIES:
Short-term loans	1,722,159	2,410,147
Accounts payable	155,456	220,119
Advances from customers	6,776	382,091
Due to related parties	495,555	234,500
Other payables and accrued expenses	3,884,148	3,893,027
Operating lease liabilities - current	411,280
Taxes payable	3,347,354	3,341,872
TOTAL CURRENT LIABILITIES	10,022,728	10,481,756
Income tax payable - noncurrent portion	625,603	625,603
Operating lease liabilities - non-current	3,132
TOTAL LIABILITIES	10,651,463	11,107,359
Commitments and contingencies
EQUITY:
Common stock; par value $0.001, 100,000,000 shares authorized; 27,333,428 and 22,871,772 shares issued and outstanding at December 31, 2019 and June 30, 2019	27,333	22,872
Additional paid-in capital	27,277,758	24,759,356
Statutory reserve	4,198,107	4,198,107
Retained earnings	45,055,036	46,735,190
Accumulated other comprehensive loss	(5,279,389)	(4,184,024)
Total Stockholders' equity of Shineco, Inc.	71,278,845	71,531,501
Non-controlling interest	1,142,400	1,100,613
TOTAL EQUITY	72,421,245	72,632,114
TOTAL LIABILITIES AND EQUITY	$ 83,072,708	$ 83,739,473

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Taxes (Details Textual) - USD ($)	6 Months Ended	12 Months Ended
	Dec. 31, 2019	Jun. 30, 2018
Taxes (Textual)
Income taxes percentage, description	The Company elects to pay the transition tax over an eight year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).
Estimated income tax expense		$ 744,766
Value added tax rate, description	The applicable VAT rate is 17% before May 1, 2018 for products sold in the PRC and decreased to 16% thereafter, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law.
Statutory rate	25.00%

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ (1,622,891)	$ 1,389,940
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	664,380	326,844
Loss from disposal of property and equipment	59,974
Provision for doubtful accounts	2,556,565	964,614
Provision for (Reversal of) inventory reserve	173,948	(38,002)
Deferred tax benefit	(169,510)	(23,903)
Income from equity method investments	(140,582)	(288,877)
Value of shares issued to IFG Fund for equity, we subsequently cancelled		434,000
Restricted shares issued for management	1,022,661
Changes in operating assets and liabilities:
Accounts receivable	(650,613)	3,486,213
Advances to suppliers	5,305,586	(2,469,378)
Inventories	(604,780)	(55,295)
Other receivables	(740,709)	369,576
Prepaid expense and other assets	429,782	283,428
Due from related parties	62,427
Right of use assets	(102,123)
Prepaid leases		229,594
Accounts payable	(60,925)	(1,305,922)
Advances from customers	(366,510)	(10,058)
Other payables	256,188	584,425
Taxes payable	40,610	239,007
NET CASH PROVIDED BY OPERATING ACTIVITIES	6,113,478	4,116,206
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment	(1,494)	(87,750)
Proceeds from disposal of property and equipment	79,233
Payment for construction in progress		(41,439)
Advances of loans to third parties	(56,857)	(396,388)
Loan advances to related party		249,362
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	20,882	(276,215)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans	284,499	988,724
Repayment of short-term loans	(924,621)	(1,080,811)
Repayment of other short-term loans	(7,112)
Proceeds from issuance of common stock	1,500,203	1,589,892
Proceeds from (repayments of) advances from related parties	262,132	(7,824)
NET CASH PROVIDED BY FINANCING ACTIVITIES	1,115,101	1,489,981
EFFECT OF EXCHANGE RATE CHANGE ON CASH	(492,344)	(1,156,716)
NET INCREASE IN CASH	6,757,117	4,173,256
CASH - Beginning of the Period	35,330,676	31,487,053
CASH - End of the Period	42,087,793	35,660,309
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes	139,906	339,607
Cash paid for interest	58,266	58,544
SUPPLEMENTAL NON-CASH OPERATING ACTIVITY:
Right-of-use assets obtained in exchange for operating lease obligations	$ 413,009

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Land Use Rights (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Land Use Rights (Textual)
Estimated useful life			50 years
Amortization expense	$ 9,123	$ 9,434
Land Use Rights [Member]
Land Use Rights (Textual)
Estimated useful life			50 years
Amortization expense			$ 18,427	$ 19,072

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Property and Equipment (Details 1) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Property, Plant and Equipment [Line Items]
Total farmland leasehold improvements	$ 3,017,935	$ 3,062,410
Blueberry farmland leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Total farmland leasehold improvements	2,318,512	2,352,679
Yew Tree Planting Base Reconstruction [Member]
Property, Plant and Equipment [Line Items]
Total farmland leasehold improvements	259,759	263,587
Greenhouse Renovation [Member]
Property, Plant and Equipment [Line Items]
Total farmland leasehold improvements	$ 439,664	$ 446,144

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Segment Reporting

6 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 16 - SEGMENT REPORTING

ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Group’s internal organizational management structure as well as information about geographical areas, business segments and major customers in for details on the Group’s business segments.

The Company’s chief operating decision maker has been identified as the Chief Executive Officer who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Group. Based on management’s assessment, the Company has determined that it has three operating segments according to its major products and locations as follows:

● Developing, manufacturing and distributing of specialized fabrics, textile products and other by-products derived from an indigenous Chinese plant called Apocynum Venetum, commonly known as “Bluish Dogbane” or known in Chinese as “Luobuma” (referred to herein as Luobuma):

The operating companies of this segment, namely Tenet-Jove and Tenet Huatai, specialize in Luobuma growing, development and manufacturing of relevant products, as well as purchasing Luobuma raw materials processing.

This segment’s operations are focused in the north region of Mainland China, mostly carried out in Beijing, Tianjin and Xinjiang City.

● Processing and distributing of traditional Chinese medicinal herbal products as well as other pharmaceutical products (“Herbal products”):

The operating companies of this segment, namely AnKang Longevity Group and its subsidiaries, process more than 600 kinds of Chinese medicinal herbal products with an established domestic sales and distribution network.

Ankang Longevity Group is also engaged in the retail pharmacy business and the operating revenue, which is not material, is also included in this segment.

● Planting, processing and distributing of green and organic agricultural produce as well as growing and cultivating of Chinese Yew trees (“Other agricultural products”):

The operating companies of this segment, the Zhisheng Group, is engaged in the business of growing and distributing green and organic vegetables and fruits as well as providing logistics services for distributing agricultural products. This segment has been focusing its efforts on the growing and cultivating of Chinese yew trees (formally known as “taxus media”), a small evergreen tree whose branches can be used for the production of medications believed to be anti-cancer and the tree itself can be used as an ornamental indoor bonsai tree, which are known to have the effect of purifying air quality.

The operations of this segment are located in the East and North regions of Mainland China, mostly carried out in Shandong Province and in Beijing where the Zhisheng Group has newly developed over 100 acres of modern greenhouses for cultivating yew trees and other plants.

The following table presents summarized information by segment for the six months ended December 31, 2019: 

	For the six months ended December 31, 2019
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	138,759		$	6,839,600		$	7,937,034		$	14,915,393
Cost of revenue and related business and sales tax		269,157			5,227,120			5,414,234			10,910,511
Gross profit		(130,398	)		1,612,480			2,522,800			4,004,882
Gross profit %		(94.0	)%		23.6	%		31.8	%		26.9	%

The following table presents summarized information by segment for the six months ended December 31, 2018:

	For the six months ended December 31, 2018
	Bluish			Herbal			Other agricultural
	dogbane			products			products			Total
Segment revenue	$	510,724		$	6,797,904		$	8,662,385		$	15,971,013
Cost of revenue and related business and sales tax		221,786			5,154,956			6,083,265			11,460,007
Gross profit		288,938			1,642,948			2,579,120			4,511,006
Gross profit %		56.6	%		24.2	%		29.8	%		28.2	%

The following table presents summarized information by segment for the three months ended December 31, 2019: 

	For the three months ended December 31, 2019
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	73,240		$	3,539,279		$	4,256,093		$	7,868,612
Cost of revenue and related business and sales tax		37,653			2,627,716			2,838,256			5,503,625
Gross profit		35,587			911,563			1,417,837			2,364,987
Gross profit %		48.6	%		25.8	%		33.3	%		30.1	%

The following table presents summarized information by segment for the three months ended December 31, 2018: 

	For the three months ended December 31, 2018
	Luobuma			Herbal			Other agricultural
	products			products			products			Total
Segment revenue	$	344,539		$	3,499,581		$	4,537,812		$	8,381,932
Cost of revenue and related business and sales tax		167,357			2,580,690			3,233,806			5,981,853
Gross profit		177,182			918,891			1,304,006			2,400,079
Gross profit %		51.4	%		26.3	%		28.7	%		28.6	%

Total Assets as of

	December 31, 2019		June 30, 2019
Luobuma products	$	4,971,200	$	6,268,974
Herbal products		46,125,282		45,095,019
Other agricultural products		31,976,226		32,375,480
	$	83,072,708	$	83,739,473

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Inventories (Tables)

6 Months Ended

Dec. 31, 2019

Inventory Disclosure [Abstract]

Schedule of inventories

	December 31, 2019			June 30, 2019
Raw materials	$	609,963		$	974,639
Work-in-process		1,177,110			651,769
Finished goods		1,936,918			1,533,318
Less: inventory reserve		(1,105,948	)		(944,167	)
Total	$	2,618,043		$	2,215,559