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. 21 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 99.78 % for the nine-month periods endedMarch 31, 2022 and 2021, respectively.
Serial No.
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 Brightening Eye 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 nine months endedMarch 31, 2022 . 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. 22 Results of Operations
Three months ended
The following table summarizes the top lines of the results of our operations
for the three months ended
For the Three Months Ended
March 31, March 31,
2022 2021 Variance %
Revenues $ 1 $ 778,675 $ (778,674 ) (100.00 )%
Humankind - 778,486 (778,486 ) (100.00 )%
HLJ Huimeijia 1 189 (188 ) (99.47 )%
Cost of Goods Sold $ 7 $ 292,316 $ (292,309 ) (100.00 )%
Humankind - 291,550 (291,550 ) (100.00 )%
HLJ Huimeijia 7 766 (759 ) (99.09 )%
Gross Profit $ (6 ) $ 486,359 $ (486,365 ) (100.00 )%
Humankind - 486,936 (486,936 ) (100.00 )%
HLJ Huimeijia (6 ) (577 ) 571 (98.96 )%
Revenue
Total revenues decreased by$778,674 or 100.00% for the three months endedMarch 31, 2022 , as compared to the same period in 2021. The decrease in revenues was primarily due to a decrease of$778,486 or 100.00% in Humankind's revenues, and a decrease of$188 in HLJ Huimeijia's revenues for the three months endedMarch 31, 2022 as compared to the same period in 2021. The decrease in Humankind's sales revenues was primarily due to Humankind's enterprise Transformation, also sales were not smooth under COVID-19.
Our total cost of goods sold decreased by
Our gross margin decreased by$486,365 or 100.00% for the three months endedMarch 31, 2022 as compared to the same period in 2021. This decrease was mainly due to the COVID-19 spread world-wide, Humankind was temporarily out of production. As the operation of Humankind was temporarily stopped, no revenue and cost of goods sold were generated. Sales by Product Line
The following table summarizes a breakdown of our sales by major product lines
for the three months ended
For the Three Months Ended
March 31, 2022 March 31, 2021
Quantity % of Quantity % of
(Unit) Sales US$ Sales (Unit) Sales US$ Sales
Humankind
Hemp Oil - $ - - % 13,636 $ 305,698 38.77 %
Collagen Peptide - - - % 4,252 60,367 7.66 %
Hemp Polypeptide - - - % 10,589 240,408 30.49 %
Hemp Protein Powder - - - % 13,375 181,810 23.06 %
HLJ Huimeijia -
Muskiness Bone
Strengthener Paste - - - % - 77 0.01 %
Dampness dispelling
pain ointment - - - % - 39 0.00 %
Refining Cream
dogskin - - - % - 30 0.00 %
Indometacin and
Furazolidone
Suppositories - - - % - 44 0.01 %
ShangBiTongDing - - - % - - %
Total - $ - - % 41,852 $ 788,473 100.00 %
23
Operating Expenses
The following table summarizes our operating expenses for the three months ended
For the Three Months Ended
March 31, March 31,
2022 2021 Variance %
Operating ExpensesSelling, general and administrative$ 136,397 $ 166,236
$ (29,839 ) (17.95 )% Depreciation and amortization 179,525 155,627 23,898 15.36 % Total Operating Expenses$ 315,922 $ 321,863 $ (5,941 ) (1.84 )% Total operating expenses for the three months endedMarch 31, 2022 were$5 ,941or 1.84% lower than those in the corresponding period in 2021. The decrease in operating expenses was primarily attributable to decrease of$29,839 or 17.95% in selling, general and administrative expenses, and increase in depreciation and amortization. The decrease in selling, general and administrative expenses was mainly due to lower staff cost. The increase in depreciation and amortization was mainly due to nil depreciation and amortization happen in
Cost of Goods Sold.
Interest Income and Interest Expense
Interest income was
Interest expense was $nil for the three months ended
Income Taxes Income taxes decreased by$98,003 , or 100%, from$98,003 for the three months endedMarch 31, 2021 to nil for the three months endedMarch 31, 2022 . The decrease in income taxes was mainly due to the decrease of the Company's gross profit in the amount of$486,365 , from the gross profit of$486,359 for the three months endedMarch 31, 2021 to the gross loss of$6 for the three months endedMarch 31, 2022 . 24
Net Income (loss) and Net Income (loss) Per Share
Net loss was$278,922 for the three months endedMarch 31, 2022 as compared to$102,032 net income for the three months endedMarch 31, 2021 . This decrease of$380,954 in net income was primarily attributable to a decrease of sales and profits in Humankind.
Net loss per share was
Nine months ended
The following table summarizes the top lines of the results of our operations
for the nine months ended
For the Nine Months Ended
March 31, March 31,
2022 2021 Variance %
Revenues $ 269 $ 6,060,473 $ (6,060,204 ) (100.00 )%
Humankind - 6,047,070 (6,047,070 ) (100.00 )%
HLJ Huimeijia 269 13,403 (13,134 ) (97.99 )%
Cost of Goods Sold $ 1,762 $ 2,538,429 $ (2,536,667 ) (99.93 )%
Humankind - 2,484,003 (2,484,003 ) (100.00 )%
HLJ Huimeijia 1,762 54,426 (52,664 ) (96.76 )%
Gross Profit $ (1,493 ) $ 3,522,044 $ (3,523,537 ) (100.04 )%
Humankind - 3,563,067 (3,563,067 ) (100.00 )%
HLJ Huimeijia (1,493 ) (41,023 ) 39,530 (96.36 )%
Revenue
Total revenues decreased by$6,060,204 or 100.00% for the nine months endedMarch 31, 2022 , as compared to the same period in 2021. The decrease in revenues was primarily caused by a decrease in Humankind's revenues, and a decrease in HLJ Huimeijia's revenues for the nine months endedMarch 31, 2022 as compared to the same period in 2021. The decrease in Humankind's sales revenues was primarily due to Humankind's enterprise Transformation, also no sales under COVID-19.
Our total cost of goods sold decreased by
Our gross margin decreased by$3,523,537 or 100.04% for the nine months endedMarch 31, 2022 as compared to the same period in 2021. This change was consistent with the change of sales and costs in Humankind. The decrease in gross profit was primarily due to the enterprise Transformation and the COVID-19. As the operation of Humankind was temporarily stopped, no revenue and cost of goods sold were generated. 25 Sales by Product Line
The following table summarizes the breakdown of our sales by major product lines
for the nine months ended
For the Nine Months Ended
March 31, 2022 March 31, 2021
Quantity % of Quantity % of
(Unit) Sales US$ Sales (Unit) Sales US$ Sales
Humankind
Hemp Oil - - - % 102,969 2,134,751 34.85 %
Collagen Peptide - - - % 49,929 621,693 10.15 %
Hemp Polypeptide - - - % 93,541 1,938,647 31.65 %
Hemp Protein Powder - - - % 113,855 1,416,847 23.13 %
HLJ Huimeijia
Muskiness Bone
Strengthener Paste 223 18 6.69 % 39,481 5,403 0.09 %
Dampness dispelling
pain ointment 1,852 154 57.25 % 19,638 2,774 0.05 %
Refining Cream
dogskin 788 65 24.16 % 15,850 2,150 0.04 %
Indometacin and
Furazolidone
Suppositories 383 32 11.90 % 21,335 3,077 0.04 %
ShangBiTongDing - - - - - - %
Enema Glycerini and
Essence repair liquid - - - - - - %
Total 3,246 269 100.00 % 456,598 $ 6,125,342 100.00 %
Operating Expenses
The following table summarizes our operating expenses for the nine months ended
For the Nine Months Ended
March 31, March 31,
2022 2021 Variance %
Operating ExpensesSelling, general and administrative$ 484,056 $ 883,527
$ (399,471 ) (45.21 )% Depreciation and amortization 539,487 465,767 73,720 15.83 % Total Operating Expenses$ 1,023,543 $ 1,349,294 $ (325,751 ) (24.14 )% Total operating expenses for the nine months endedMarch 31, 2022 were$325,751 or 24.14% lower than those in the same period in 2021. The decrease in operating expenses was primarily attributable to decrease of$399,471 or 45.21% 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 nine months ended
Income Taxes Income taxes decreased by$716,938 , or 100%, from$716,938 for the nine months endedMarch 31, 2021 to $nil for the nine months endedMarch 31, 2022 . The decrease in income taxes was mainly due to the decrease of the Company's gross profit in the amount of$3,523,537 , from the gross profit of$3,522,044 for the nine months endedMarch 31, 2021 to the gross loss of$1,493 for the nine months endedMarch 31, 2022 . 26
Net Income and Net Income Per Share
Net loss was$873,833 for the nine months endedMarch 31, 2022 , as compared to$ 1,557,767 net income for the nine months endedMarch 31, 2021 . This decrease of$2,431,600 in net loss was primarily attributable to a decrease of sales and profits in Humankind.
Net loss 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
March 31, June 30,
2022 2021
Cash and cash equivalents $ 47,409,020 $ 44,346,744
Working capital $ 39,076,197 $ 38,617,377
Inventories $ 861,538 $ 761,639
For the Nine Months
ended March 31,
2022 2021
Cash provided by (used in):
Operating activities
For the nine months endedMarch 31, 2022 , our net increase in cash and cash equivalents totaled$3,062,276 , which total was comprised of net cash provided by operating activities in the amount of$2,971,902 , and the positive effect of prevailing exchange rates on our cash position of$90,374 . For the nine months endedMarch 31, 2021 , our net increase in cash and cash equivalents totaled$5,043,671 , which total was comprised of net cash provided by operating activities in the amount of$3,089,788 , net cash used in investing activities in the amount of$13,540 and the effect of prevailing exchange rates on our cash position of$1,967,423 . Our working capital as ofMarch 31, 2022 was$39,076,197 , compared to working capital of$38,617,377 as ofJune 30, 2021 . This increase of$458,820 or 1% was primarily attributable to the increase of cash and cash equivalents in the amount of$3,062,276 , and decrease of net account receivable in the amount
of$2,329,926 . 27 Net cash provided by operating activities was$2,971,902 for the nine months endedMarch 31, 2022 , primarily attributable to net loss in the amount of$873,833 and a decrease of accounts receivable in the amount of$2,282,640 . The positive effect of exchange rate changes on cash and cash equivalents in the amount of$90,374 for the nine months endedMarch 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 6.4566 to 1 and 6.3393 to 1 as ofJune 30, 2021 andMarch 31, 2022 , respectively, and the average exchange rate from USD to RMB was 6.4038 for the nine months endedMarch 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$7,457,310 as ofMarch 31, 2022 , as compared to$8,079,761 as ofJune 30, 2021 , a decrease of$622,451 or 8%. 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 endedMarch 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 endedJune 30, 2021 . 28
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