CHINA HEALTH INDUSTRIES HOLDINGS, INC. FORWARD LOOKING STATEMENTS
We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under this caption as well as under captions elsewhere in this document, are forward-looking statements. In some cases, these statements are identifiable through the use of words such as "anticipate", "believe", "estimate", "expect", "intend", "plan", "project", "target", "can", "could", "may", "should", "will", "would", and similar expressions. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with theSEC should be considered in evaluating forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. You are cautioned not to place undue reliance on such forward-looking statements, which reflect our view only as of the date of this report.
Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the following:
? the effect of political conditions, economic conditions, market conditions,
and geopolitical events;
? legislative and regulatory changes that affect our business;
? the availability of funds and working capital; and
? the actions and initiatives of current and potential competitors.
Except as required by applicable laws, regulations, or rules, we do not
undertake any responsibility to publicly release any revisions to these
forward-looking statements to take into account events or circumstances that
occur after the date of this report. Additionally, we do not undertake any
responsibility to update you on the occurrence of any unanticipated events which
may cause actual results to differ from those expressed or implied by any
forward-looking statements.
The following discussion and analysis should be read in conjunction with our
unaudited condensed consolidated financial statements and the related notes
thereto as filed with the
Except as otherwise indicated by the context, references in this report to "we", "us", "our", "the Registrant", "our Company", or "the Company" are toChina Health Industries Holdings, Inc. , aDelaware corporation,China Health Industries Holdings Limited , a limited liability company incorporated under the laws ofHong Kong , its wholly owned subsidiary inChina ,Harbin Humankind Biology Technology Co. Limited ("Humankind"), and indirect wholly owned subsidiary,Heilongjiang Huimeijia Pharmaceutical Co., Ltd. ("HLJ Huimeijia"). Unless the context otherwise requires, all references to (i) the "PRC" and "China" are tothe People's Republic of China ; (ii) "U.S. dollar," "$" and "US$" are toUnited States dollars; (iii) "RMB" are to Renminbi Yuan ofChina ; (iv) "Securities Act" are to the Securities Act of 1933, as amended; and (v) "Exchange Act" are to the Securities Exchange Act of 1934, as amended. 20 Business Overview
Our principal business operations are conducted through our wholly-owned subsidiaries, Humankind and HLJ Huimeijia.
The Company owns a GMP-certified plant and production facilities and has the capacity to produce 21 different NMPA-approved medicines, 14 NMPA-approved health supplement products and 8 hemp derivative products in soft capsule, hard capsule, tablet, granule, and oral liquid forms. These products address the needs of some key sectors inChina , including the feminine, geriatric, and children's markets. HLJ Huimeijia was founded onOctober 30, 2003 and its latest GMP certificate is effective untilApril 24, 2023 . HLJ Huimeijia engages in the manufacture and distribution of tincture, ointments, rubber paste, including hormones, topical solution, suppositories, enemas, oral liquids, and liniment, including traditional Chinese medicine extractions. HLJ Huimeijia's predecessor wasHeilongjiang Xue Du Pharmaceutical Co., Ltd. , which established brand recognition in the market through its supply of high-quality drug products. HLJ Huimeijia is a "high and new technology" enterprise that provides the most comprehensive types of topical medical products inHeilongjiang Province , a northeastern province ofChina . We have developed the following products that are derived from hemp and obtained business license to manufacture and sell these products. We began to sell these products sinceMay 2018 . Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide are sold through Humankind, other cosmetics are sold through HLJ Huimeijia. The revenue of the Hemp Seed Beer accounted for 100.00% and 0.00% for the six-month periods endedDecember 31, 2022 and 2021, respectively. Serial No.Name 1 Hemp Oil 2 Hemp Protein Powder 3 Hemp Polypeptide 4 Collagen Peptide 5 Natural Hemp Essence Repair Lotion 6 Natural Hemp Revitalizing Essence 7 Natural Hemp Anti-aging BrighteningEye Cream 8 Natural Hemp Frozen Age Nourishing Cream 9 Hemp Seed Beer Our business model is to sell our products directly to end customers through our own sales personnel as well as our sales agents, operating primarily inAnhui ,Zhejiang ,Shanghai ,Jiangsu ,Beijing andGansu , where most of our revenues are used to be generated. Because of the "Transformation of the Company", we sold a little of our product to sales agents for the six months endedDecember 31, 2022 . Humankind is using existing materials to research and develop hemp related products. Humankind decided to transform the primary business to Cannabidiol ("CBD") extractive project, following the government's guidance in expanding the use of hemps into cosmetics, food, or daily uses. The Company will also receive the government's sponsorship in R&D expenses to support the company research in CBD aspect. However, by the end of fiscal year 2022, the support guidelines had not been published. As the Chinese government has officially stopped the zero-case policy, we expect the CBD extractive project to start generating revenue and finally balance our investment in the hemp related products by
2024
("Transformation").
21
Results of Operations
Three months ended
The following table summarizes the top lines of the results of our operations
for the three months ended
December 31, December 31,
2022 2021 Variance %
Revenues $ 32,650 $ 2 $ 32,648 100.00 %
Humankind 32,650 - 32,650 100.00 %
HLJ Huimeijia - 2 (2 ) (100.00 )%
Cost of Goods Sold $ 29,645 $ 11 $ 29,634 100.00 %
Humankind 29,645 - 29,645 100.00 %
HLJ Huimeijia - 11 (11 ) (100.00 )%
Gross Profit $ 3,005 $ (9 ) $ 3,014 100.00 %
Humankind 3,005 - 3,005 100.00 %
HLJ Huimeijia - (9 ) 9 (100.00 )%
Revenue
Total revenues increased by $32,648 or 100.00% for the three months ended
December 31, 2022 , as compared to the same period in 2021. The increase in
revenues was primarily due to an increase of $32,650 in Humankind's revenues for
the three months ended December 31, 2022 as compared to the same period in 2021.
The increase in Humankind's sales revenues was primarily derived from selling a
new product, Hemp Seed Beer, in the three months ended December 31, 2022 .
Our total cost of goods sold increased by $29,634 or 100.00% for the three
months ended December 31, 2022 as compared to the same period in 2021. The
increase in Humankind's cost of goods sold was primarily derived from cost on
selling a new product, Hemp Seed Beer, in the three months ended December 31,
2022 .
Our gross margin increased by $3,014 for the three months ended December 31,
2022 as compared to the same period in 2021. This change was consistent with the
change of sales and costs in HLJ Huimeijia and Humankind. The increase is mainly
derived from selling a new product Hemp Seed Beer, in the three months ended
December 31, 2022 .
Sales by Product Line
The following table summarizes a breakdown of our sales by major product lines
for the three months ended
December 31, 2022 December 31, 2021
Quantity % of Quantity % of
(Unit) Sales US $ Sales (Unit) Sales US $ Sales
Humankind
Hemp Oil - - -% - - - %
Collagen Peptide - - -% - - - %
Hemp Polypeptide - - -% - - - %
Hemp Protein Powder - - -% - - - %
Hemp Seed Beer 6,456 32,650 100.00 % - - - %
HLJ Huimeijia
Muskiness Bone
Strengthener Paste - - -% - - - %
Dampness dispelling
pain ointment - - -% - - - %
Refining Cream
dogskin - - -% - - - %
Indometacin and
Furazolidone
Suppositories - - -% - - - %
ShangBiTongDing - - -% - - - %
Total 6,456 32,650 100.00 % - $ - - %
22
Operating Expenses
The following table summarizes our operating expenses for the three months ended
December 31, December 31,
2022 2021 Variance %
Operating Expenses
Selling, general and administrative $ 223,473 $ 92,586 $ 130,887 141.37 %
Depreciation and amortization 192,365 180,012 12,353 6.86 %
Total Operating Expenses $ 415,838 $ 272,598 $ 143,240 52.55 %
Total operating expenses for the three months endedDecember 31, 2022 were$143,240 or 52.55% higher than those in the corresponding period in 2021. The increase in operating expenses was primarily attributable to an increase of$130,887 or 141.37% in selling, general and administrative expenses. The increase in selling, general and administrative expenses was mainly due to the expired destruction of inventory.
Interest Income and Interest Expense
Interest income was$26,046 for the three months endedDecember 31, 2022 , as compared to$40,598 for the three months endedDecember 31, 2021 . This decrease of$14,552 , or 36%, was mainly due to the decreased average balance of bank deposits compared with the same period of 2021. This decline in bank balances was mainly due to the effects of currency translation difference from RMB to USD during the periods and normal daily operating expenses payment.
Interest expense was $nil for the three months ended
Income Taxes Income taxes was $nil for the three months endedDecember 31, 2022 as compared to$107,057 tax credit for the three months endedDecember 31, 2021 . The decrease of tax credit was primarily due to the increase of net profits before income taxes. 23
Net Income (loss) and Net Income (loss) Per Share
Net Income was$929,303 for the three months endedDecember 31, 2022 , as compared to$573,524 net loss for the three months endedDecember 31, 2021 . This increase of$1,502,827 in net income was primarily due to the transfer of one of Huimeijia's production technique. Such transfer would not affect future production. Net income per share was$0.0142 for the three months endedDecember 31, 2022 and$0.0088 net loss per share for the three months endedDecember 31, 2021 , respectively. This increase was primarily a result of the aforementioned increase in net profit.
Six months ended
The following table summarizes the top lines of the results of our operations
for the six months ended
December 31, December 31,
2022 2021 Variance %
Revenues $ 32,650 $ 268 $ 32,382 100.00 %
Humankind 32,650 - 32,650 100.00 %
HLJ Huimeijia - 268 (268 ) (100.00 )%
Cost of Goods Sold $ 29,645 $ 1,755 $ 27,890 100.00 %
Humankind 29,645 - 29,645 100.00 %
HLJ Huimeijia - 1,755 (1,755 ) (100.00 )%
Gross Profit $ 3,005 $ (1,487 ) $ 4,492 (100.00 )%
Humankind 3,005 - 3,005 100.00 %
HLJ Huimeijia - (1,487 ) (1,487 ) 100.00 %
Revenue
Total revenues increased by $32,382 or 100.00% for the six months ended December
31, 2022 , as compared to the same period in 2021. The increase in revenues was
primarily caused by an increase of $32,650 in Humankind's revenues for the six
months ended December 31, 2022 as compared to the same period in 2021. The
increase in Humankind's sales revenues was primarily derived from selling a new
product, Hemp Seed Beer, in the six months ended December 31, 2022 .
Our total cost of goods sold increased by $27,890 or 100.00% for the six months
ended December 31, 2022 as compared to the same period in 2021. This increase
was mainly derived from cost on selling a new product, Hemp Seed Beer, in the
six months ended December 31, 2022 .
Our gross margin increased by
24
Sales by Product Line
The following table summarizes the breakdown of our sales by major product lines
for the six months ended
December 31, 2022 December 31, 2021
Quantity % of Quantity % of
(Unit) Sales US$ Sales (Unit) Sales US$ Sales
Humankind
Hemp Oil - - - % - - - %
Collagen Peptide - - - % - - - %
Hemp Polypeptide - - - % - - - %
Hemp Protein Powder - - - % - - - %
Hemp Seed Beer 6,456 32,650 100.00 % - - - %
HLJ Huimeijia
Muskiness Bone
Strengthener Paste - - - % 223 18 6.87 %
Dampness dispelling
pain ointment - - - % 1,852 153 57.05 %
Refining Cream
dogskin - - - % 788 65 24.28 %
Indometacin and
Furazolidone
Suppositories - - - % 383 32 11.80 %
ShangBiTongDing - - - - - - %
Enema Glycerini and
Essence repair liquid - - - - - - %
Total 6,456 32,650 100.00 % 3,246 $ 268 100.00 %
Operating Expenses
The following table summarizes our operating expenses for the six months ended
December 31, December 31,
2022 2021 Variance %
Operating Expenses
Selling, general and administrative $ 558,319 $ 347,659 $ 210,660 60.59 %
Depreciation and amortization 348,242 359,962 (11,720 ) (3.26 )%
Total Operating Expenses $ 906,561 $ 707,621 $ 198,940 28.11 %
Total operating expenses for the six months ended December 31, 2022 were
$198,940 or 28.11% higher than those in the same period in 2021. The increase in
operating expenses was primarily attributable to increase of $210,660 or 60.59%
in selling, general and administrative expenses. The increase in selling,
general and administrative expenses was mainly due to the expired destruction of
inventory.
Interest Income and Interest Expense
Interest income was$60,529 for the six months endedDecember 31, 2022 , as compared to$81,632 for the six months endedDecember 31, 2021 . This decrease of$21,103 , or 26%, was mainly due to the decreased average balance of bank deposits compared with the same period of 2021. This decline in bank balances was mainly due to the effects of currency translation difference from RMB to USD during the periods and normal daily operating expenses payment.
Interest expense was $nil and $nil for the six months ended
Income Taxes
Income taxes was $nil for the six months ended
25
Net Income and Net Income Per Share
Net income was$472,858 for the six months endedDecember 31, 2022 , as compared to$594,911 net loss for the six months endedDecember 31, 2021 . This increase of$1,067,769 in net income was primarily attributable to the transfer of one of Huimeijia's production technique. Such transfer would not affect future production.
Net income per share was
Liquidity and Capital Resources
We believe our current working capital position, together with our expected future cash flows from operations and loans from our major shareholder, will be adequate to fund our operations in the ordinary course of business, anticipated capital expenditures, debt payment requirements, and other contractual obligations for at least the next twelve months. However, this belief is based upon many assumptions and is subject to numerous risks, and there can be no assurance that we will not require additional funding in the future.
The following table summarizes our cash and cash equivalents positions, our
working capital, and our cash flow activities as of
December 31, June 30,
2022 2022
Cash and cash equivalents $ 43,169,488 $ 44,789,999
Working capital $ 37,372,363 $ 37,652,693
Inventories $ 419,437 $ 521,229
For the
Six Months ended
December 31,
2022 2021
Cash provided by (used in):
Operating activities
For the six months endedDecember 31, 2022 , our net decrease in cash and cash equivalents totaled$ 1,620,511 , which total was comprised of net cash provided by operating activities in the amount of$512,196 and the negative effect of prevailing exchange rates on our cash position of$2,132,707 . Our working capital as ofDecember 31, 2022 was$37,372,363 , compared to working capital of$37,652,693 as ofJune 30, 2022 . This decrease of$280,330 or 1% was primarily attributable to the decrease of cash and cash equivalents in the amount of$1,620,511 , decrease of inventory in the amount of$101,792 , which offset by the decrease of advance from customers in the amount of$298,071 and a decrease of amount due to related parties in the amount of$ 1,089,149 . 26 Net cash provided by operating activities was$512,196 for the six months endedDecember 31, 2022 , primarily attributable to net income in the amount of$472,858 . The negative effect of exchange rate changes on cash and cash equivalents in the amount of$2,132,707 for the six months endedDecember 31, 2022 was mainly a result of the effect of the valuation of the RMB against the USD on the significant amount of cash and cash equivalents held by the Company in RMB. The exchange rates from USD to RMB were 6.6981 to 1 and 6.8972 to 1 as ofJune 30, 2022 andDecember 31, 2022 , respectively, and the average exchange rate from USD to RMB was 6.9789 for the six months endedDecember 31, 2022 . Other than as described in this report, we have no present agreements or commitments with respect to any material acquisitions of businesses, products, product rights, technologies, or any other material capital expenditures. However, we will continue to evaluate acquisitions of, and/or investments in, products, technologies, capital equipment or improvements, or companies that complement our business and may make such acquisitions and/or investments in the future. Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions and/or investments. We may not be able to obtain such financing on commercially reasonable terms, if at all. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. Related Party Debts We had related party debts in the amount of$5,670,612 as ofDecember 31, 2022 , as compared to$6,759,761 as ofJune 30, 2022 , a decrease of$1,089,149 or 16%. Our related party debts mainly consist of a loan from Mr.Xin Sun , the CEO of the Company. The loan is unsecured, non-interest bearing, and has no fixed terms of repayment. There was no written agreement for the loan. See Note 8.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are currently material or reasonably likely to be material to the Company's financial position or results of operations.
Critical Accounting Policies and Estimates
We prepare the unaudited condensed consolidated financial statements in accordance with US GAAP. These accounting principles require us to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information, and assumptions that we believe
to be reasonable. There have been no material changes during the six months endedDecember 31, 2022 in the Company's significant accounting policies to those previously disclosed in the annual report on Form 10-K for the fiscal year ended June
30,
2022.
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