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. 22 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 Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide accounted for 0.00% and 99.75% for the six-month periods endedDecember 31, 2021 and 2020, 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
Our business is conducted through our sales agents and sales personnel. We 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 generated. Sales by agents inAnhui ,Zhejiang ,Shanghai ,Jiangsu ,Beijing , andGansu provinces accounted for $nil of our total sales, respectively, for the six months endedDecember 31, 2021 . The decrease in Humankind's sales revenues was primarily due to Humankind's enterprise transformation. The company is using existing materials researching and developing new products. Due to the COVID-19, the research process is slow and unpredictable, which could be completed by the end of calendar year of 2022 ("Transformation"). Although we do not currently sell our products online, we expect to do so in the future. 23 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,
2021 2020 Variance %
Revenues $ 2 $ 3,089,716 $ (3,089,714 ) (100.00 )%
Humankind 3,088,499 (3,088,499 ) (100.00 )%
HLJ Huimeijia 2 1,217 (1,215 ) (99.84 )%
Cost of Goods Sold $ 11 $ 1,294,333 $ (1,294,322 ) (100.00 )%
Humankind 1,290,003 (1,290,003 ) (100.00 )%
HLJ Huimeijia 11 4,330 (4,319 ) (99.75 )%
Gross Profit $ (9 ) $ 1,795,383 $ (1,795,392 ) (100.00 )%
Humankind 1,798,496 (1,798,496 ) (100.00 )%
HLJ Huimeijia (9 ) (3,113 ) 3,104 (99.71 )%
Revenue
Total revenues decreased by $3,089,714 or 100.00% for the three months ended
December 31, 2021 , as compared to the same period in 2020. The decrease in
revenues was primarily due to a decrease of $3,088,499 or 100.00% in Humankind's
revenues, and a decrease of $1,215 in HLJ Huimeijia's revenues for the three
months ended December 31, 2021 as compared to the same period in 2020. The
decrease in Humankind's sales revenues was primarily due to Humankind's
enterprise was under transformation, also sales were not smooth under COVID-19
epidemic.
Our total cost of goods sold decreased by $1,294,322 or 100.00% for the three
months ended December 31, 2021 as compared to the same period in 2020. The
decrease in Humankind's sales revenues was primarily due to Humankind's
enterprise was under transformation, also sales were not smooth under COVID-19
epidemic.
Our gross margin decreased by $1,795,392 or 100.00% for the three months ended
December 31, 2021 as compared to the same period in 2020. This decrease was
mainly due to the COVID-19 spread world-wide, Humankind was temporarily outof production. Sales by Product Line
The following table summarizes a breakdown of our sales by major product lines
for the three months ended
December 31, 2021 December 31, 2020
Quantity Sales % of Quantity Sales % of
(Unit) US$ Sales (Unit) US$ Sales
Humankind
Hemp Oil - $ - - % 51,329 $ 1,070,558 34.29 %
Collagen Peptide - - - % 26,545 332,184 10.64 %
Hemp Polypeptide - - - % 45,876 958,210 30.70 %
Hemp Protein
Powder - - - % 60,773 759,458 24.33 %
HLJ Huimeijia
Muskiness Bone
Strengthener
Paste - - - % 1,480 336 0.01 %
Dampness
dispelling pain
ointment - - - % 975 296 0.01 %
Refining Cream
dogskin - - - % 800 146 0.01 %
Indometacin and
Furazolidone
Suppositories - - - % 1,645 438 0.01 %
ShangBiTongDing - - - % - - - %
Total - $ - - % 189,423 $ 3,121,626 100.00 %
24
Operating Expenses
The following table summarizes our operating expenses for the three months ended
December 31, December 31,
2021 2020 Variance %
Operating Expenses
Selling, general and administrative $ 92,586 $ 516,959 $ (424,373 ) (82.09 )%
Depreciation and amortization 180,012 152,268 27,744 18.22 %
Total Operating Expenses $ 272,598 $ 669,227 $ (396,629 ) (59.27 )%
Total operating expenses for the three months endedDecember 31, 2021 were$396,629 or 59.27% lower than those in the corresponding period in 2020. The decrease in operating expenses was primarily attributable to decrease of$424,373 or 82.09% in selling, general and administrative expenses. The decrease in selling, general and administrative expenses was mainly due to lower staff cost.
Interest Income and Interest Expense
Interest income was$40,598 for the three months endedDecember 31, 2021 , as compared to$34,300 for the three months endedDecember 31, 2020 . This increase of$6,298 , or 18%, was mainly due to the increased average balance of bank deposits compared with the same period of 2020.
Interest expense was $nil for the three months ended
Income Taxes Income taxes decreased by$451,799 , or 131%, from$344,742 for the three months endedDecember 31, 2020 to positive$107,057 for the three months endedDecember 31, 2021 . The decrease in income taxes was mainly due to the decrease of the Company's gross profits in the amount of$1,795,392 , from the gross profits of$1,795,383 for the three months endedDecember 31, 2020 to the gross loss of$9 for the three months endedDecember 31, 2021 . 25
Net Income (loss) and Net Income (loss) Per Share
Net loss was$573,524 for the three months endedDecember 31, 2021 , as compared to$816,043 net income for the three months endedDecember 31, 2020 . This decrease of$1,389,567 in net income was primarily attributable to a decrease of sales and profits in Humankind.
Net loss per share was
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,
2021 2020 Variance %
Revenues $ 268 $ 5,281,798 $ (5,281,530 ) (99.99 )%
Humankind - 5,268,584 (5,268,584 ) (100.00 )%
HLJ Huimeijia 268 13,214 (12,946 ) (97.97 )%
Cost of Goods Sold $ 1,755 $ 2,246,113 $ (2,244,358 ) (99.92 )%
Humankind - 2,192,453 (2,192,453 ) (100.00 )%
HLJ Huimeijia 1,755 53,660 (51,905 ) (96.73 )%
Gross Profit $ (1,487 ) $ 3,035,685 $ (3,037,172 ) (100.05 )%
Humankind - 3,076,131 (3,076,131 ) (100.00 )%
HLJ Huimeijia (1,487 ) (40,446 ) 38,959 (96.32 )%
Revenue
Total revenues decreased by $5,281,530 or 99.99% for the six months ended
December 31, 2021 , as compared to the same period in 2020. The decrease in
revenues was primarily caused by a decrease of $5,268,584 or 100.00% in
Humankind's revenues, and a decrease of $12,946 in HLJ Huimeijia's revenues for
the six months ended December 31, 2021 as compared to the same period in 2020.
The decrease in Humankind's sales revenues was primarily due to Humankind's
enterprise being under transformation, also no sales under COVID-19 epidemic.
Our total cost of goods sold decreased by
Our gross margin decreased by
26
Sales by Product Line
The following table summarizes the breakdown of our sales by major product lines
for the six months ended
December 31, 2021 December 31, 2020
Quantity Sales % of Quantity Sales % of
(Unit) US$ Sales (Unit) US$ Sales
Humankind
Hemp Oil - - - % 89,333 1,829,053 34.27 %
Collagen Peptide - - - % 45,677 561,326 10.52 %
Hemp Polypeptide - - - % 82,952 1,698,239 31.82 %
Hemp Protein Powder - - - % 100,480 1,235,037 23.14 %
HLJ Huimeijia
Muskiness Bone
Strengthener Paste 223 18 6.87 % 39,481 5,326 0.10 %
Dampness dispelling
pain ointment 1,852 153 57.05 % 19,638 2,735 0.05 %
Refining Cream
dogskin 788 65 24.28 % 15,850 2,120 0.04 %
Indometacin and
Furazolidone
Suppositories 383 32 11.80 % 21,335 3,033 0.06 %
ShangBiTongDing - - - - - - %
Enema Glycerini and
Essence repair liquid - - - - - - %
Total 3,246 268 100.00 % 414,746 $ 5,336,869 100.00 %
Operating Expenses
The following table summarizes our operating expenses for the six months ended
December 31, December 31,
2021 2020 Variance %
Operating Expenses
Selling, general and administrative $ 347,659 $ 717,291 $ (369,632 ) (51.53 )%
Depreciation and amortization 359,962 310,140 49,822 16.06 %
Total Operating Expenses $ 707,621 $ 1,027,431 $ (319,810 ) (31.13 )%
Total operating expenses for the six months ended December 31, 2021 were
$319,810 or 31.13% lower than those in the same period in 2020. The decrease in
operating expenses was primarily attributable to decrease of $369,632 or 51.53%
in selling, general and administrative expenses. The decrease in selling,
general and administrative expenses was mainly due to the lower staff cost.Interest Income and Interest Expense
Interest income was
Interest expense was $nil for the six months ended
Income Taxes Income taxes decreased by$618,935 , or 100%, from$618,935 for the six months endedDecember 31, 2020 to $nil for the six months endedDecember 31, 2021 . The decrease in income taxes was mainly due to the decrease of the Company's gross profits in the amount of$3,037,172 , from the gross profits of$3,035,685 for the six months endedDecember 31, 2020 to the gross loss of$1,487 for the six months endedDecember 31, 2021 . 27
Net Income and Net Income Per Share
Net loss was$594,911 for the six months endedDecember 31, 2021 , as compared to$1,455,735 net income for the six months endedDecember 31, 2020 . This decrease of$2,050,646 in net loss was primarily attributable to a decrease of sales
and profits in Humankind. Net loss per share was$0.0091 for the six months endedDecember 31, 2021 and net income per share was$0.0222 for the six months endedDecember 31, 2020 , respectively. This decrease was primarily a result of the aforementioned decrease in net profit.
Liquidity and Capital Resources
We believe our current cash balance with positive 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,
2021 2021
Cash and cash equivalents $ 47,066,157 $ 44,346,744
Working capital $ 38,967,181 $ 38,617,377
Inventories $ 816,596 $ 761,639
For the
Six Months ended
December 31,
2021 2020
Cash provided by (used in):
Operating activities
For the six months endedDecember 31, 2021 , our net increase in cash and cash equivalents totaled$2,719,413 , which total was comprised of net cash provided by operating activities in the amount of$2,799,172 , and the negative effect of prevailing exchange rates on our cash position of$79,759 . For the six months endedDecember 31, 2020 , our net increase in cash and cash equivalents totaled$ 4,593,621 , which total was comprised of net cash provided by operating activities in the amount of$2,347,484 , net cash used in investing activities in the amount of$11,366 and the effect of prevailing exchange rates on our cash position of$2,257,503 . Our working capital as ofDecember 31, 2021 was$38,967,181 , compared to working capital of$38,617,377 as ofJune 30, 2021 . This increase of$349,804 or 1% was primarily attributable to the increase of cash and cash equivalents in the
amount of$2,719,413 . 28
Net cash provided by operating activities was$2,799,172 for the six months endedDecember 31, 2021 , primarily attributable to net loss in the amount of$594,911 and a decrease of accounts receivable in the amount of$ 2,250,149 . The negative effect of exchange rate changes on cash and cash equivalents in the amount of$79,759 for the six months endedDecember 31, 2021 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 6.4566 to 1 and 6.3726 to 1 as ofJune 30, 2021 andDecember 31, 2021 , respectively, and the average exchange rate from USD to RMB was 6.4316 for the six months endedDecember 31, 2021 . 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$8,252,532 as ofDecember 31, 2021 , as compared to$8,079,761 as ofJune 30, 2021 , an increase of$172,771 or 2%. 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 three months endedDecember 31, 2021 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,
2021.
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