UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-Q
  (Mark
One)
  x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For
the quarterly period ended: December
31, 2008
  ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For
the transition period from ____________ to _____________
  Commission File No.
000-51060
 
 UNIVERSAL
      FOG, INC.(Exact
      name of small business issuer as specified in its
  charter)
  Delaware
              
              86-0827216(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Tax. I.D. No.)168 Binbei Street, Songbei District, Harbin City
                Heilongjiang Province, People’s Republic of China(Address
      of Principal Executive Offices)
              (Zip
      Code)011-86-451
      8989 1246(Registrant’s
      Telephone Number, Including Area Code)
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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   x
  No    ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer.  ̈
                  Accelerated
      filer.     ̈Non-accelerated filer.    ̈(Do not check if a smaller reporting company)
                  Smaller reporting company.  
      x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes    ̈
  No   x
 
 APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
 PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
  Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. oYes oNo
  APPLICABLE
ONLY TO CORPORATE ISSUERS:
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
 
 As of
February 13, 2009, the number of shares issued and outstanding of the issuer’s
common stock is 62,234,737.
  
  TABLE
OF CONTENTS
  Part
      I – Financial Information
                    F-1Item
      1. Financial Statements
                    1Item
      2.  Management’s Discussion And Analysis Or Plan Of
      Operation
                    2Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                    6Item
      4.  Controls And Procedures
                    6Part
      II – Other InformationItem
      1.  Legal Proceedings
                    8Item
      1A.Risk Factors
                    8Item
      2. Unregistered Shares Of Equity Securities And Use Of
      Proceeds
                    8Item
      3.  Defaults Upon Senior Securities
                    8Item
      4.  Submission Of Matters To A Vote Of Security
      Holders
                    8Item
      5.  Other Information
                    8Item
      6.  Exhibits
                    8Signatures
                    9
  
  PART
I – FINANCIAL INFORMATION
 
 ITEM
1.
 FINANCIAL
STATEMENTS
 
 UNIVERSAL
FOG, INC.
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  PageConsolidated
      Balance Sheets as of December 31, 2008 and June 30, 2008
      (Unaudited)
                          
                          F-2Consolidated
      Statements of Operations for the three and six months ended December 31,
      2008 and 2007 (Unaudited)
                          
                          F-3Consolidated
      Statement of Changes in Stockholders’ Equity for the six months ended
      December 31, 2008 (Unaudited)
                          
                          F-4Consolidated
      Statements of Cash Flows for the six months ended December 31, 2008 and
      2007 (Unaudited)
                          
                          F-5Notes
      to Consolidated Financial Statements (Unaudited)
                          
                          F-6
      –
F-7
  F-1
 
 UNIVERSAL
FOG, INC.
 CONSOLIDATED
BALANCE SHEETS
 (UNAUDITED)
  December 31,
                    
                    
                    June 30,2008
                    
                    
                    2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                    
                    $
                    126,619
                    
                    
                    $
                    35,251Accounts
      receivable
                    
                    
                    8,938
                    
                    
                    
                    -Inventory
                    
                    
                    189,930
                    
                    
                    
                    107,125Prepaid
      expenses
                    
                    
                    39,827
                    
                    
                    
                    34,944Total
      current assets
                    
                    
                    365,314
                    
                    
                    
                    177,320Property
      and equipment, net of accumulated depreciation of $98,333 and $68,841,
      respectively
                    
                    
                    1,088,024
                    
                    
                    
                    1,075,564Intangible
      assets, net of accumulated amortization of $84,840 and $76,720,
      respectively
                    
                    
                    1,151,548
                    
                    
                    
                    1,152,925TOTAL
      ASSETS
                    
                    $
                    2,604,886
                    
                    
                    $
                    2,405,809LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                    
                    $
                    422,548
                    
                    
                    $
                    460,641Related party
      debt
                    
                    
                    803,377
                    
                    
                    
                    549,982Total
      current liabilities
                    
                    
                    1,225,925
                    
                    
                    
                    1,010,623STOCKHOLDERS'
      EQUITYCommon
      stock, $0.0001 par value, 300,000,000 shares authorized, 62,234,737 and
      61,203,088 shares issued and outstanding, respectively
                    
                    
                    6,223
                    
                    
                    
                    6,120Additional
      paid-in-capital
                    
                    
                    1,373,798
                    
                    
                    
                    1,342,490Accumulated
      other comprehensive income
                    
                    
                    253,554
                    
                    
                    
                    246,004Accumulated
      deficit
                    
                    
                    (254,614
                    )
                    
                    
                    (199,428
                    )Total
      stockholders' equity
                    
                    
                    1,378,961
                    
                    
                    
                    1,395,186TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                    
                    $
                    2,604,886
                    
                    
                    $
                    2,405,809
 
 See notes
to unaudited consolidated financial statements.
  F-2
 
 UNIVERSAL
FOG, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 Three Months Ended
                    
                    
                    Six Months EndedDecember 31,
                    
                    
                    December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007REVENUE
                    
                    $
                    136,437
                    
                    
                    $
                    12,395
                    
                    
                    $
                    422,644
                    
                    
                    $
                    13,219COST
      OF GOODS SOLD
                    
                    
                    118,781
                    
                    
                    
                    10,905
                    
                    
                    
                    369,812
                    
                    
                    
                    16,197Gross
      profit (loss)
                    
                    
                    17,656
                    
                    
                    
                    1,490
                    
                    
                    
                    52,832
                    
                    
                    
                    (2,978
                    )OPERATING
      EXPENSESSelling,
      general and administrative expense
                    
                    
                    32,475
                    
                    
                    
                    2,182
                    
                    
                    
                    49,444
                    
                    
                    
                    34,425Depreciation
      and amortization expense
                    
                    
                    13,280
                    
                    
                    
                    12,237
                    
                    
                    
                    26,446
                    
                    
                    
                    24,888Total
      operating expenses
                    
                    
                    45,755
                    
                    
                    
                    14,419
                    
                    
                    
                    75,890
                    
                    
                    
                    59,313Operating
      loss
                    
                    
                    (28,099
                    )
                    
                    
                    (12,929
                    )
                    
                    
                    (23,058
                    )
                    
                    
                    (62,291
                    )OTHER
      INCOME (EXPENSES)Interest
      income
                    
                    
                    184
                    
                    
                    
                    8,344
                    
                    
                    
                    226
                    
                    
                    
                    28Interest
      expenses
                    
                    
                    (18,497
                    )
                    
                    
                    -
                    
                    
                    
                    (29,947
                    )
                    
                    
                    -Other
      income
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    150Other
      expenses
                    
                    
                    -
                    
                    
                    
                    (6
                    )
                    
                    
                    (145
                    )
                    
                    
                    (3
                    )LOSS
      BEFORE INCOME TAXES
                    
                    
                    (46,412
                    )
                    
                    
                    (4,591
                    )
                    
                    
                    (52,774
                    )
                    
                    
                    (62,266
                    )Income
      taxes
                    
                    
                    1
                    
                    
                    
                    -
                    
                    
                    
                    2,412
                    
                    
                    
                    -Net
      loss
                    
                    
                    (46,413
                    )
                    
                    
                    (4,591
                    )
                    
                    
                    (55,186
                    )
                    
                    
                    (62,266
                    )OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain (loss)
                    
                    
                    2,414
                    
                    
                    
                    (80,676
                    )
                    
                    
                    7,550
                    
                    
                    
                    28,562Comprehensive
      loss
                    
                    $
                    (43,999
                    )
                    
                    $
                    (85,267
                    )
                    
                    $
                    (47,636
                    )
                    
                    $
                    (33,704
                    )Basic
      and diluted net loss per share
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )Weighted
      average shares outstanding - basic and diluted
                    
                    
                    61,214,302
                    
                    
                    
                    61,203,088
                    
                    
                    
                    61,208,695
                    
                    
                    
                    61,203,088
  See notes
to unaudited consolidated financial statements.
  F-3
  UNIVERSAL
FOG, INC.
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
 (UNAUDITED)
  AccumulatedAdditional
                  
                  
                  
                  
                  
                  OtherCommon Stock
                  
                  
                  Paid-in
                  
                  
                  Accumulated
                  
                  
                  ComprehensiveShares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  Income
                  
                  
                  TotalBalances,
      June 30, 2008
                  
                  
                  61,203,088
                  
                  
                  $
                  6,120
                  
                  
                  $
                  1,342,490
                  
                  
                  $
                  (199,428
                  )
                  
                  $
                  246,004
                  
                  
                  $
                  1,395,186Shares
      issued to minority holders in reverse merger
                  
                  
                  1,031,649
                  
                  
                  
                  103
                  
                  
                  
                  (103
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Contributed
      capital
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,464
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,464Imputed
      interest on shareholder loan
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  29,947
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  29,947Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (55,186
                  )
                  
                  
                  -
                  
                  
                  
                  (55,186
                  )Other
      comprehensive income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,550
                  
                  
                  
                  7,550Balances,
      December 31, 2008
                  
                  
                  62,234,737
                  
                  
                  $
                  6,223
                  
                  
                  $
                  1,373,798
                  
                  
                  $
                  (254,614
                  )
                  
                  $
                  253,554
                  
                  
                  $
                  1,378,961
 
 See notes
to unaudited consolidated financial statements.
  F-4
  UNIVERSAL
FOG, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  Six Months EndedDecember 31,2008
                          
                          
                          2007Cash
      flows from operating activities:Net
      loss
                          
                          $
                          (55,186
                          )
                          
                          $
                          (62,266
                          )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      expense
                          
                          
                          29,064
                          
                          
                          
                          11,743Amortization
      expense
                          
                          
                          7,685
                          
                          
                          
                          13,145Imputed
      interest
                          
                          
                          29,947
                          
                          
                          
                          -Changes
      in operating assets and liabilities:Accounts
      receivable
                          
                          
                          (8,938
                          )
                          
                          
                          (1,904
                          )Inventory
                          
                          
                          (82,805
                          )
                          
                          
                          (12,664
                          )Prepaid
      expenses
                          
                          
                          (4,883
                          )
                          
                          
                          33,640Accounts
      payable & other current liabilities
                          
                          
                          (38,093
                          )
                          
                          
                          (63,784
                          )Net
      cash used in operating activities
                          
                          
                          (123,209
                          )
                          
                          
                          (82,090
                          )Cash
      flows from investing activities:Purchases
      of patents, property and equipment
                          
                          
                          (35,627
                          )
                          
                          
                          (1,917
                          )Net
      cash used in investing activities
                          
                          
                          (35,627
                          )
                          
                          
                          (1,917
                          )Cash
      flows from financing activities:Contributed
      capital
                          
                          
                          1,464
                          
                          
                          
                          -Proceeds
      from related party debt
                          
                          
                          253,395
                          
                          
                          
                          15,837Net
      cash provided by financing activities
                          
                          
                          254,859
                          
                          
                          
                          15,837Effects
      of foreign exchange on cash
                          
                          
                          (4,655
                          )
                          
                          
                          95,354Net
      increase in cash and cash equivalents
                          
                          
                          91,368
                          
                          
                          
                          27,184Cash
      and cash equivalents, at beginning of year
                          
                          
                          35,251
                          
                          
                          
                          8,297Cash
      and cash equivalents, at end of year
                          
                          $
                          126,619
                          
                          
                          $
                          35,481Supplemental
      disclosures of cash flow information:Interest
      paid
                          
                          $
                          -
                          
                          
                          $
                          -Income
      taxes paid
                          
                          
                          -
                          
                          
                          
                          -Noncash
      investing and financing activities:Fixed
      assets purchased on account
                          
                          $
                          -
                          
                          
                          $
                          12,520
 
 See notes
to unaudited consolidated financial statements.
  F-5
  UNIVERSAL
FOG, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 Note
1 – BASIS OF PRESENTATION
 
 The
accompanying unaudited interim financial statements of Universal Fog, Inc. (the
“Company”) have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules of the Securities and
Exchange Commission (the “SEC”), and should be read in conjunction with the
Company’s audited 2008 annual financial statements and notes thereto filed with
the SEC on Form PRER14C by the Company on October 2, 2008. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the result of
operations for the interim periods presented have been reflected herein. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the financial statements,
which would substantially duplicate the disclosure required in the Company’s
2008 annual financial statements have been omitted.
 
 Note
2 - GOING CONCERN
 
 The
Company had an accumulated deficit of $254,614 and a working capital deficit of
$860,611 as of December 31, 2008. These factors raise substantial doubt about
the Company’s ability to continue as a going concern.
 
 Management
has taken actions to revise its operating and financial requirements, which it
believes are sufficient to provide the Company with the ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments related to the recoverability or classification of asset-carrying
amounts or the amounts and classification of liabilities that may result should
the Company be unable to continue as a going concern.
 
 During
the period from December 14, 2003 (inception) through December 31, 2008, the
Company relied heavily for its financing needs on its majority owner; Mr. Xin
Sun. Loans from Mr. Sun are described in Note 5 to the unaudited consolidated
financial statements.
 
 Note
3 - CONTROL BY PRINCIPAL OWNERS
 
 The
directors, executive officers, their affiliates and related parties own,
beneficially and in the aggregate, the majority of the voting power of the
outstanding capital of the Company. Accordingly, if directors, executive
officers and their affiliates, voted their shares uniformly, they would have the
ability to control the approval of most corporate actions, including approving
significant expenses, increasing the authorized capital stock and the
dissolution, merger or sale of the Company’s assets.
 
 Note
4 - INVENTORY
 
 Inventories
consisted of the following at December 31, 2008 and June 30, 2008:
 
 December 31, 2008
                    
                    
                    June 30, 2008Raw
      materials
                    
                    $
                    149,238
                    
                    
                    $
                    82,650Supply
      and packing materials
                    
                    
                    23,958
                    
                    
                    
                    24,461Work-in-progress
                    
                    
                    7,527
                    
                    
                    
                    -Finished
      products
                    
                    
                    9,207
                    
                    
                    
                    14Total
                    
                    $
                    189,930
                    
                    
                    $
                    107,125
 
 Note
5 - RELATED PARTY DEBT
 
 “Related
party debt" represents temporary short-term loans from majority owner, Mr. Sun
Xin, a PRC citizen. These loans are unsecured, non-interest bearing and have no
fixed terms of repayment, and are therefore, deemed payable on demand. Cash
flows classified as proceeds from related party debt are classified as cash
flows from financing activities. The total borrowings from Mr. Sun were $803,377
and $549,982 as of December 31, 2008 and June 30, 2008,
respectively.
 
 Interest
was imputed on the loans using the Chinese bank borrowing rate of 7.47%. The
total imputed interest expense for the six months ended December 31, 2008 was
$29,947.
  F-6
  Note
6 - COMMITMENTS AND CONTINGENCIES
 
 The
Company’s assets are located in the PRC and revenues are derived from operations
in the PRC.
 
 In terms
of industry regulations and policies, the economy of the PRC has been
transitioning from a planned economy to market oriented economy. Although in
recent years the Chinese government has implemented measures emphasizing the
utilization of market forces for economic reforms, the reduction of state
ownership of productive assets and the establishment of sound corporate
governance in business enterprises, a substantial portion of productive assets
in PRC are still owned by the Chinese government. For example, all lands are
state owned and are leased to business entities or individuals through
governmental granting of Land Use Rights. The granting process is typically
based on government policies at the time of granting and it could be lengthy and
complex. This process may adversely affect our company’s future manufacturing
expansions. The Chinese government also exercises significant control over PRC’s
economic growth through the allocation of resources and providing preferential
treatment to particular industries or companies. Uncertainties may arise with
changing of governmental policies and measures.
 
 The
Company faces a number of risks and challenges not typically associated with
companies in North America and Western Europe, since its assets exist solely in
the PRC, and its revenues are derived from its operations therein. The PRC is a
developing country with an early stage market economic system, overshadowed by
the state. Its political and economic systems are very different from the more
developed countries and are in a state of change. The PRC also faces many
social, economic and political challenges that may produce major shocks and
instabilities and even crises, in both its domestic arena and in its
relationships with other countries, including the United States. Such shocks,
instabilities and crises may in turn significantly and negatively affect the
Company’s performance.
 
 Note
7 - NEW SUBSIDIARY
 
 On
October 14, 2008, Harbin Humankind set up a 99% owned subsidiary with its
primary business being manufacturing and distributing medicine. Mr. Xin Sun, the
Company’s majority owner, owns 1% interest of this subsidiary. The subsidiary is
consolidated in the consolidated financial statements of the
Company.
  F-7
  ITEM
      2.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.
  The
following discussion of the financial condition and results of operation of the
Company for the three and six months ended December 31, 2008 and 2007 should be
read in conjunction with the selected financial data, the financial statements
and the notes to those statements that are included elsewhere in this Current
Report on Form 10-Q (“Form 10-Q”).
 
 Cautionary
Note Regarding 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 the captions “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” “Business,” as well as 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. We intend such
forward-looking statements to be covered by the safe harbor provisions contained
in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”)
and in Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). 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. 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. These risks and
uncertainties, together with the other risks described from time to time in
reports and documents that we file with the SEC should be considered in
evaluating forward-looking statements.
 
 The
nature of our business makes predicting the future trends of our revenue,
expenses, and net income difficult. Thus, our ability to predict results or the
actual effect of our future plans or strategies is inherently uncertain. The
risks and uncertainties involved in our business could affect the matters
referred to in any forward-looking statements and it is possible that our actual
results may differ materially from the anticipated results indicated in these
forward-looking statements. 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, economic, and market conditions and geopolitical
      events;
 ·
              legislative
      and regulatory changes that affect our
business;
 ·
              the
      availability of funds and working
capital;
 ·
              the
      actions and initiatives of current and potential
    competitors;
 ·
              investor
      sentiment; and
 ·
              our
      reputation.
 
 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
consolidated financial statements and the related notes thereto as filed with
the SEC and other financial information contained elsewhere in this
Report.
 
 Except as
otherwise indicated by the context, references in this Form 10-Q to “we,” “us,”
“our,” “the Registrant”, “our Company,” or “the Company” are to Universal Fog,
Inc., a Delaware corporation, China Health Industries Holdings Limited, and its
wholly owned subsidiary, Harbin Humankind Biology Technology Co. Limited. Unless
the context otherwise requires, all references to (i) “PRC” and “China” are to
the People’s Republic of China; (ii) “U.S. dollar,” “$” and “US$” are to United
States dollars; (iii) “RMB” are to Yuan Renminbi of China; (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.
 
 Company
Overview
 
 Universal
Fog, Inc. was incorporated in the state of Arizona on July 11, 1996 and was the
successor of the business known as Arizona Mist, Inc. which began in 1989. On
May 9, 2005, we entered into a Stock Purchase Agreement and Share Exchange
(effecting a reverse merger) with Edmonds 6, Inc. (Edmonds 6) and our name was
changed to Universal Fog, Inc. Edmonds 6 was incorporated on August 19, 2004
under the laws of the State of Delaware to engage in any lawful corporate
undertaking, including, but not limited to, selected mergers and acquisitions.
Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous
operation since 1996) became a wholly-owned subsidiary of Edmonds
6.
  2


We began
manufacturing systems for outdoor cooling in Arizona and quickly expanded to
distribute throughout the United States.  Our primary product was a
misting system which consisted of a high pressure pump assembled to
specifications.
 
 China
Health Industries Holdings Limited ("China Health") was incorporated on July 20,
2007 in Hong Kong under the Companies Ordinance as a limited liability company.
China Health was formed for the purpose of seeking and consummating a
merger or acquisition with a business entity organized as a private corporation,
partnership, or sole proprietorship as defined by the Statement of Financial
Accounting Standards (SFAS) No. 7.
  Harbin
Humankind Biology Technology Co., Limited ("Harbin Humankind") was incorporated
in Harbin City, Heilongjiang Province, the PRC on December 14, 2003, as a
limited liability company under the Company Law of the PRC. The Company is
engaged in the business of production and distribution of healthcare and beauty
products.
  On August
20, 2007, the sole shareholder of China Health entered into a Share
Purchase Agreement with the owners of Harbin Humankind. Pursuant to the
Agreement, China Health purchased 100% of the ownership in Harbin Humankind
for a cash consideration of $60,408. Subsequent to completion of the Agreement,
Harbin Humankind became a wholly-owned subsidiary of China Health. The share
purchase transaction is being accounted for as a “reverse merger,” since the
owner of Harbin Humankind owns a majority of the outstanding shares of China
Health ‘s common stock immediately following the execution of the
Agreement. Harbin Humankind is deemed to be the acquirer in the reverse merger.
Consequently, the assets and liabilities and the historical operations that are
reflected in the financial statements for periods prior to the Agreement are
those of Harbin Humankind and are recorded at the historical cost basis. After
completion of the Agreement, China Health’s consolidated financial
statements include the assets and liabilities of both China Health and Harbin
Humankind, the historical operations of Harbin Humankind and the operations of
China Health and its subsidiaries from the closing date of the
Agreement.
 
 On
December 31, 2008, China Health closed a reverse merger with Universal Fog,
Inc, a U.S. public traded shell company.  China Health is the accounting
acquirer in the transaction and the transaction is treated as a recapitalization
of the Company. After the transaction and a 1:20 reverse stock split, Xin Sun
now owns 61,203,088 shares of common stock, representing 98.3% of the 62,234,737
total outstanding shares of common stock of the Company.
 
 Results
of Operations
 
 Six
Months Ended December 31, 2008 Compared to the Six Months Ended December 31,
2007
 
 Revenue. Our revenue
increased $409,425, or 3,097%, to $422,644 for the six months ended December 31,
2008, compared to revenue of $13,219 for the six months ended December 31, 2007.
The significant increase in revenue is directly due to the introduction of two
new products. With the new production facilities in place, the development of
new production lines and the new marking strategy, our output and sales
increased significantly.
 
 Cost of Sales. Our cost of
sales increased $353,615, or 2,183%, to $369,812 for the six months ended
December 31, 2008, compared to cost of sales of $16,197 for the six months ended
December 31, 2007. These costs increased as a result of the increased sales,
increased labor costs and an increase in depreciation due to newly-purchased
machinery.
 
 Gross Profit. We had gross
profit of $52,832 for the six months ended December 31, 2008, an increase
of $55,810 or 1,874% compared to gross loss of $2,978 for the six months ended
December 31, 2007. This increase was primarily attributable to the increase in
our revenue which was partly offset by our increase in cost of
sales.
 
 Operating Expenses. Operating
expenses increased $16,577, or 28%, to $75,890 for the six months ended December
31, 2008, compared to operating expenses of $59,313 for the six months ended
December 31, 2007. The increase was mainly attributable to increased
selling and administrative expenses due to increased sales activities.
..
  Net Loss. Net loss for the
six months ended December 31, 2008 was $55,186, a decrease of $7,080 or 11%
compared to net loss for the six months ended December 31, 2007 of $62,266. The
decrease was primarily attributable to the enlargement of our production
scale and development of new production lines as discussed
above..
 
 Comprehensive Income (Loss).
Comprehensive loss for the six months ended December, 31, 2008 was
$47,636, an increase of $13,932 or 41% compared to comprehensive loss for
the six months ended December, 31, 2007 of $33,704. The comprehensive loss
includes the contribution of foreign currency translation gains.
 
 Three
Months Ended December 31, 2008 Compared to the Three Months Ended December 31,
2007
 
 Revenue. Our revenue
increased $124,042, or 1,001%, to $136,437 for the three months ended December
31, 2008, compared to revenue of $12,395 for the three months ended December 31,
2007. The significant increase in revenue is directly due to the introduction of
two new products. With the new production facilities in place, the development
of new production lines and the new marking strategy, our output and sales
increased significantly.
  3
  Cost of Sales. Our cost of
sales increased $107,876, or 989%, to $118,781for the three months ended
December 31, 2008, compared to cost of sale of $10,905 for the three months
ended December 31, 2007. These costs increased as a result of the increased
sales, increased labor costs and an increase in depreciation due to
newly-purchased machinery.
 
 Gross Profit. We had gross
profit of $17,656 for the three months ended December 31, 2008, an increase of
$16,166 or 1,085% compared to gross profit of $1,490 for the three months ended
December 31, 2007. This increase was primarily attributable to the increase in
our revenue which was partly offset by our increase in cost of
sales.
 
 Operating Expenses. Operating
expenses increased $31,336, or 217%, to $45,755 for the three months ended
December 31, 2008, compared to operating expenses of $14,419 for the three
months ended December 31, 2007. The increase was mainly attributable to
increased selling and administrative expenses due to increased sales
activities.
 
 Net Loss. Net loss for the
three months ended December 31, 2008 was $46,413, an increase of $41,822 or 911%
compared to net loss for the three months ended December 31, 2007 of $4,591. The
increase was attributable to the enlargement of our production scale and
development of new production lines as discussed above.
 
 Comprehensive Income (Loss).
Comprehensive loss for the three months ended December, 31, 2008 was $43,999 a
decrease of $41,268 or 48% compared to comprehensive loss for the three months
ended December, 31, 2007 of $85,267. The comprehensive loss includes the
contribution of foreign currency translation gains.
 
 Liquidity
and Capital Resources
 
 We had a
working capital deficit of $860,611 as of December 31, 2008.
 
 During
the six months ended December 31, 2008, net cash increased by $91,368 or 259%,
consisting of $123,209 used in operating activities, $35,627 used in investment
activities, $254,859 provided by financing activities and effects of foreign
exchange on cash of $4,655.
 
 Net cash
used in operating activities increased $41,119 or 50% during the six month
period ended December 31, 2008 versus the comparable period in 2007. This
increase was primarily due to changes in working capital associated with
the increase in inventory purchases, accounts receivable and prepaid
expenses resulting from the increase of production and sales
activities.
 
 The
primary drivers of cash used in investing activities were capital spending. Cash
used in investing activities was $35,627 and $1,917 for the six months ended
December 31, 2008 and 2007, respectively. During the six months ended December
31, 2008, a total of $35,627 cash outflow was used to purchase new equipment and
additions to facilities.
 
 Net cash
provided by financing activities for the six months ended December 31, 2008
consisted of proceeds from related party debt of $253,395, which is a critical
source of our working capital funding.
 
 Critical
Accounting Policies and Estimates
 
 The
discussion and analysis of the Company’s financial condition presented in this
section are based upon the audited consolidated financial statements of the
Company, including Harbin Humankind, which have been prepared in accordance with
the generally accepted accounting principles in the United States. For purposes
of this section entitled “Critical Accounting Policies and Estimates,” During
the preparation of the financial statements of the Company we were required to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, the Company evaluates its estimates and
judgments, including those related to sales, returns, pricing concessions, bad
debts, inventories, investments, fixed assets, intangible assets, income taxes
and other contingencies. The Company bases its estimates on historical
experience and on various other assumptions that it believes are reasonable
under current conditions. Actual results may differ from these estimates under
different assumptions or conditions.
 
 In
response to the SEC’s Release No. 33-8040, “Cautionary Advice Regarding
Disclosure about Critical Accounting Policy,” The Company identified the most
critical accounting principles upon which its financial status depends. The
Company determined that those critical accounting principles are related to the
use of estimates, inventory valuation, revenue recognition, income tax and
impairment of intangibles and other long-lived assets. The Company presents
these accounting policies in the relevant sections in this management’s
discussion and analysis, including the Recently Issued Accounting Pronouncements
discussed below.
 
 Revenue Recognition. The
Company recognizes revenue when the earnings process is complete. This generally
occurs when products are shipped to unaffiliated customer or services are
performed in accordance with terms of the agreement, title and risk of loss have
been transferred, collectability is reasonably assured and pricing is fixed or
determinable. Accruals are made for sales returns and other allowances based on
the Company’s experience
  4
  Accounts Receivable, Trade and
Allowance for Doubtful Accounts. The Company’s business operations are
conducted in the PRC. During the normal course of business, the Company extends
unsecured credit to its customers. Management reviews accounts receivable on a
regular basis to determine if the allowance for doubtful accounts is adequate.
An estimate for doubtful accounts is recorded when collection of the full amount
is no longer probable. At December 31, 2008, and 2007, no allowances for
doubtful accounts were accrued.
 
 Inventories. Inventories are
stated at the lower of cost or market using the weighted average method. The
Company reviews its inventory on a regular basis for possible obsolete goods or
to determine if any reserves are necessary for potential obsolescence. As of
December 31, 2008 and 2007, the Company has determined that no reserves are
necessary.
 
 Impairment of Long-Lived
Assets. The Company reviews all of its long-lived assets, including
tangible and intangible long-lived assets, for impairment indicators at least
annually and performs detailed impairment testing for all long-lived assets
whenever impairment indicators are present. When necessary, the Company records
charges for impairments of long-lived assets for the amount by which the present
value of future cash flows, or some other fair value measure, is less than the
carrying value of these assets.
 
 Off-Balance Sheet
Arrangements. The Company has not entered into any financial
guarantees or other commitments to guarantee the payment obligations of any
third parties. The Company has not entered into any derivative contracts that
are indexed to China the Company’s shares and classified as shareholder’s equity
or that are not reflected in the Company’s financial statements. Furthermore,
The Company does not have any retained or contingent interest in assets
transferred to an unconsolidated entity that serves as credit, liquidity or
market risk support to such entity. The Company does not have any variable
interest in any unconsolidated entity that provides financing, liquidity, market
risk or credit support to the Company or engages in leasing, hedging or research
and development services with the Company.
  Income Taxes. The
Company has adopted Statement of Financial Accounting Standards No. 109,
“Accounting for Income Taxes” (SFAS 109). SFAS 109 requires the recognition of
deferred income tax liabilities and assets for the expected future tax
consequences of temporary differences between income tax basis and financial
reporting basis of assets and liabilities. Provision for income taxes consist of
taxes currently due plus deferred taxes. Since the Company had no operations
within the United States there is no provision for US income taxes and there are
no deferred tax amounts as of December 31, 2008 and 2007. The charge for
taxation is based on the results for the year as adjusted for items, which are
non-assessable or disallowed. It is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
 
 Deferred
tax is accounted for using the balance sheet liability method in respect of
temporary differences arising from differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax
basis used in the computation of assessable tax profit. In principle, deferred
tax liabilities are recognized for all taxable temporary differences, and
deferred tax assets are recognized to the extent that it is probably that
taxable profit will be available against which deductible temporary differences
can be utilized. Deferred tax is calculated at the tax rates that are expected
to apply to the period when the asset is realized or the liability is settled.
Deferred tax is charged or credited in the income statement, except when it
related to items credited or charged directly to equity, in which case the
deferred tax is also dealt with in equity. Deferred tax assets and liabilities
are offset when they related to income taxes levied by the same taxation
authority and the Company intends to settle current tax assets and liabilities
on a net basis.
 
 Recently
Issued Accounting Pronouncements
 
 In July
2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for
Uncertainty in Income Taxes,” which prescribes a comprehensive model for how a
company should recognize, measure, present and disclose in its financial
statements uncertain tax positions that the Company has taken or expects to take
on a tax return (including a decision whether to file or not to file a return in
a particular jurisdiction). The accounting provisions of FIN No. 48 are
effective for fiscal years beginning after December 15, 2006. The adoption of
this Interpretation did not have a material impact on its financial position and
results of operations.
 
 In
September 2006, the SEC issued SAB No. 108, which provides guidance on the
process of quantifying financial statement misstatements. In SAB No. 108, the
SEC staff establishes an approach that requires quantification of financial
statements errors, under both the iron-curtain and the roll-over methods, based
on the effects of the error on each of the Company’s financial statements and
the related financial statement disclosures. SAB No. 108 is generally effective
for annual financial statements in the first fiscal year ending after November
15, 2006. The transition provisions of SAB No. 108 permits existing public
companies to record the cumulative effect in the first year ending after
November 15, 2006 by recording correcting adjustments to the carrying values of
assets and liabilities as of the beginning of that year with the offsetting
adjustment recorded to the opening balance of retained earnings. The adoption of
SAB No. 108 did not have a material effect on the Company’s financial position
or results of operations.
 
 In
September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”. SFAS No.
157 defines fair values, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. This Statement shall be
effective for financial statements issued for fiscal years beginning after
November 25, 2007, and interim periods within those fiscal years. Earlier
application is encouraged provided that the reporting entity has not yet issued
financial statements for that fiscal year, including financial statements for an
interim period with that fiscal year. The Company is currently evaluating the
impact of adopting SFAS No. 157 on its financial position and results of
operations.
  5
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115. SFAS No. 159 permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. Unrealized gains and losses on items for
which the fair value option has been selected are reported in earnings. SFAS No.
159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. The Company has
not yet determined the impact, if any, on its financial statements.
 
 In
December 2007, the FASB issued SFAS No 141 (Revised 2007), Business Combinations
(“SFAS No. 141(R)”) to significantly change the accounting for business
combinations. Under SFAS No. 141(R), an acquiring entity will be required to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition date fair value with limited exceptions and will change the
accounting treatment for certain specific items, including:
 
  ̈
                acquisition
      costs will generally be expensed as
incurred;
 
  ̈
                noncontrolling
      interests will be valued at fair value at the date of acquisition;
      and
 
  ̈
              liabilities
      related to contingent consideration will be recorded at fair value at the
      date of acquisition and subsequently remeasured each subsequent reporting
      period.
 
 SFAS No.
141(R) is effective for fiscal years beginning after December 15,
2008.  The Company will adopt SFAS No. 141(R) on July 1, 2009, and the
Company has not yet determined the impact, if any, on its financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51, to establish new
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 requires
the recognition of a noncontrolling interest (minority interest) as equity in
the consolidated financial statements and separate from the parent’s equity. The
amount of net income attributable to the noncontrolling interest will be
included in consolidated net income on the face of the income statement. SFAS
No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary
that do not result in deconsolidation are equity transactions if the parent
retains its controlling financial interest. In addition, SFAS No. 160 requires
that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. SFAS No. 160 also includes expanded disclosure requirements
regarding the interests of the parent and its noncontrolling interest. SFAS No.
160 is effective for fiscal years beginning after December 15, 2008. The Company
will adopt SFAS No. 160 on July 1, 2009, and the Company has not yet determined
the impact, if any, on its financial statements.
 
 ITEM
3.QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
 Not
Applicable.
 
 ITEM
4.               CONTROLS
AND PROCEDURES.
  Evaluation
of our Disclosure Controls
 
 As of the
end of the period covered by this Quarterly Report on Form 10-Q, our principal
executive officer and principal financial officer have evaluated the
effectiveness of our “disclosure controls and procedures” (“Disclosure
Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are
designed with the objective of ensuring that information required to be
disclosed in our reports filed under the Exchange Act, such as this Quarterly
Report, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms.
Disclosure Controls are also designed with the objective of ensuring that such
information is accumulated and communicated to our management, including the CEO
and CFO, as appropriate to allow timely decisions regarding required disclosure.
Our management, including the CEO and CFO, does not expect that our Disclosure
Controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions.
  Based
upon their controls evaluation, our CEO and CFO have concluded that our
Disclosure Controls are effective at a reasonable assurance level.
  6
 
 Changes
in internal control over financial reporting
 
 There
have been no changes in our internal controls over financial reporting during
our third fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
  7
  PART
II – OTHER INFORMATION
  ITEM
1.               LEGAL
PROCEEDINGS.
  There is
no material legal proceeding pending against us.
 
 ITEM
1A.            RISK
FACTORS.
 
 Not
Applicable.
 
 ITEM
2.               UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  None.
 
 ITEM
3.               DEFAULTS
UPON SENIOR SECURITIES.
  None.
 
 ITEM
4.               SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  On
October 19, 2007, a majority of shareholders ratified the approval by the
Company’s board of directors of an amendment to the Company’s Articles of
Incorporation that would adopt a 20-for-one reverse split of the Company’s
common stock. The Company effected the reverse split on February 7, 2008, and in
conjunction with the reverse split, effective November 13, 2008, the Company’s
common stock began trading on the Over the Counter Bulletin Board under the new
symbol, “UVFO.”
 
 ITEM
5.               OTHER
INFORMATION.
  None.
 
 ITEM
6.               EXHIBITS.
 
 Copies of
the following documents are included as exhibits to this report pursuant to Item
601 of Regulation S-K.
 
 Exhibit No.
                                
                                SEC Ref.
                                  No.
                                
                                Title of Document1
                                
                                31.1
                                
                                Certification
      of the Principal Executive and Principal Financial Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.2
                                
                                32.1
                                
                                Certification
      of the Principal Executive and Principal Financial Officer pursuant to
      U.S.C. Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.
  8
  SIGNATURES
  In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 UNIVERSAL
      FOG, INC.Dated:
       February 13, 2009
                          /s/Sun
      XinSun
      XinChief
      Executive OfficerDated:
        February 13, 2009
                          /s/
      Sun XinSun
      XinChief
      Financial
Officer
  9