EDGAR 10-K Filing

Company CIK: 1309057
Filing Year: 2021
Filename: 1309057_10-K_2021_0001213900-21-048756.json

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ITEM 1. BUSINESS
Item 1. Business.
Our History and Corporate Structure
China Health Industries Holdings, Inc. (“China Health US”) 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, it entered into a stock purchase agreement and share exchange (effecting a reverse merger) with Edmonds 6, Inc. (“Edmonds 6”), a Delaware corporation, and changed its name to Universal Fog, Inc. Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous operation since 1996) became a wholly-owned subsidiary of Edmonds 6.
China Health Industries Holdings Limited (“China Health HK”) was incorporated on July 20, 2007 in Hong Kong under the Companies Ordinance as a limited liability company. China Health HK 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 FASB ACS Topic 915 (“Development Stage Entities”).
Harbin Humankind Biology Technology Co., Limited (“Humankind”) was incorporated in Harbin City, Heilongjiang Province, the People’s Republic of China (the “PRC”) on December 14, 2003, as a limited liability company under the Company Law of the PRC. Humankind is engaged in the manufacturing and sale of health products.
On August 20, 2007, the sole shareholder of China Health HK entered into a share purchase agreement (the “Share Purchase Agreement”) with the owners of Humankind. Pursuant to the Share Purchase Agreement, China Health HK purchased 100% of the ownership in Humankind for a cash consideration of $60,408 (the “Share Purchase”). Subsequent to the completion of the Share Purchase, Humankind became a wholly-owned subsidiary of China Health HK. The Share Purchase was accounted for as a “reverse merger” since the owner of Humankind owned a majority of the outstanding shares of China Health HK’s common stock immediately following the execution of the Share Purchase Agreement, it was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that have been reflected in the financial statements for periods prior to the Share Purchase are those of Humankind and have been recorded at the historical cost basis. After completion of the Share Purchase, China Health HK’s consolidated financial statements include the assets and liabilities of both China Health HK and Humankind, the historical operations of Humankind, and the operations of China Health HK and its subsidiaries from the closing date of the Share Purchase onward.
On October 14, 2008, Humankind set up a 99% owned subsidiary, Harbin Huimeijia Medicine Company (“Huimeijia”), with its primary business being manufacturing and distributing medicine. Mr. Xin Sun, the Company’s majority owner, owns 1% of Huimeijia. Huimeijia is consolidated in the consolidated financial statements of China Health HK.
On December 31, 2008, China Health HK entered into a reverse merger with Universal Fog, Inc., a U.S. publicly traded shell company (the “Transaction”). China Health HK is the acquirer in the Transaction, and the Transaction was treated as a recapitalization of China Health US. After the Transaction and a 20:1 reverse stock split, Mr. Xin Sun owned 61,203,088 shares of common stock, representing 98.3% of the 62,234,737 total outstanding shares of common stock of China Health US. On April 7, 2009, Mr. Sun transferred 28,200,000 shares of common stock to 296 individuals, leaving him with 33,003,088 shares of common stock of China Health US, or approximately 53.03% of the total outstanding shares of common stock. Universal Fog, Inc. changed its name to China Health Industries Holdings, Inc. on February 19, 2009.
On November 22, 2013, Humankind completed the acquisition of Heilongjiang Huimeijia Pharmaceutical Co., Ltd. (“HLJ Huimeijia”) for a total purchase price of $16,339,869 (RMB100,000,000). HLJ Huimeijia was founded on October 30, 2003, and is engaged in the manufacturing and distribution of tincture, ointments, rubber paste (including hormones), topical solution, suppositories, liniment (including traditional Chinese medicine extractions), enemas and oral liquids. HLJ Huimeijia’s predecessor is Heilongjiang Xue Du Pharmaceutical Co., Ltd., which has established its brand name in the market through its supply of high-quality medical products. HLJ Huimeijia is categorized as a “high and new technology” enterprise by the Science Technology Department in Heilongjiang Province. HLJ Huimeijia has 21 products which have been approved by, and have received approval numbers issued by, the National Medical Products Administration (“NMPA”). In addition, HLJ Huimeijia is the holder of one patent for utility models, five patents for external design and three trademarks in China, including the Chinese brand name of “Xue Du” which has an established reputation among customers in northeastern China.
On December 24, 2014, Humankind entered into a stock transfer agreement (the “Original Agreement”) with (i) Xiuzheng Pharmaceutical Group Co., Ltd. a company incorporated under the laws of the PRC and located in Jilin province (“Xiuzheng Pharmacy” or the “Buyer”), (ii) Mr. Xin Sun, the CEO of the Company, and (iii) Huimeijia, a subsidiary of Humankind that is 99% owned by Humankind and 1% owned by Mr. Xin Sun. Pursuant to the Original Agreement, Humankind and Mr. Xin Sun (collectively, the “Equity Holders”), would sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy.
On February 9, 2015, the four parties entered into a supplementary agreement (the “Supplementary Agreement”) to modify the terms of the Original Agreement, pursuant to which the Equity Holders and Huimeijia (collectively, the “Asset Transferors”) would only sell 19 drug approval numbers (the “Assets”) to Xiuzheng Pharmacy. The Equity Holders would have retained their equity interests in Huimeijia, but would have pledged such equity interests to Xiuzheng Pharmacy until the Assets were transferred.
On October 12, 2016, the four parties agreed to rescind the Supplementary Agreement and entered into a new supplementary agreement pursuant to which the parties agreed to execute the transfer of the equity interests based on the Original Agreement, and the Equity Holders sold their respective equity interests in Huimeijia to Xiuzheng Pharmacy for total cash consideration of RMB 8,000,000 (approximately $1,306,186 USD, the “Purchase Price”) to the Equity Holders. As of October 12, 2016, Huimeijia had completed changes in its business registration, and Xiuzheng Pharmacy had obtained a new business license issued by the local State Administration of Industry and Commerce in Harbin (“Harbin SAIC”) for Huimeijia, in which Huimeijia’s ownership was recorded as held by Xiuzheng Pharmacy, and the legal representative (a person that is authorized to take most corporate actions on behalf of a company under PRC corporate laws) of Huimeijia had been appointed by the Buyer.
China Health US, China Health HK, Humankind and HLJ Huimeijia are collectively referred herein to as the “Company.”
As of June 30, 2021, the Company’s corporate structure was as follows:
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, oral liquid forms. These products address the needs of some key sectors in China, including the feminine, geriatric, and children’s markets.
HLJ Huimeijia was founded on October 30, 2003 and its latest GMP certificate is effective until April 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 was Heilongjiang 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 in Heilongjiang Province, a northeastern province of China.
We sell our products directly to end customers through our own sales personnel as well as our sales agents, operating primarily in Anhui, Zhejiang, Shanghai, Jiangsu, Beijing and Gansu, where most of our revenues are generated. Sales by agents in Anhui, Zhejiang, Shanghai, Jiangsu, Beijing, and Gansu provinces accounted for 23%, 18%, 16%, 13%, 12%, and 9%, of our total sales, respectively, for the fiscal year 2021. Although we do not currently sell our products online, we expect to do so in the future.
There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the economy of China, U.S. and the rest of the world and, as such, the extent of the business disruption and the related financial impact cannot be reasonably estimated at this time.
Products
We are licensed to sell our products, including our medical drugs, only in the PRC.
(i) Hemp Derivative Products
We have developed the following products that are derived from hemp and obtained business license to manufacture and sell these products. We have begun to sell these products since May 2018. Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide are sold through Humankind. Other products are sold through HLJ Huimeijia. The revenue of the Hemp Oil, Hemp Protein Powder and Hemp Polypeptide accounted for 89.88% and 80.40% of the total revenues for the fiscal year of 2021 and 2010, respectively.
Serial No.
Name
Hemp Oil
Hemp Protein Powder
Hemp Polypeptide
Collagen Peptide
Natural Hemp Essence Repair Lotion
Natural Hemp Revitalizing Essence
Natural Hemp Anit-aging Brightening Eye Cream
Natural Hemp Frozen Age Nourishing Cream
(ii) Health Products
Our “QunLe” brand Sailuozhi soft capsule, a supplement made from frog oil, soybean isoflavone, procyanidine (made from grape seeds) and vitamin E, is for freckle removal and skin moisture. The NMPA certification for this product was issued on September 3, 2013 with a certification number of 2013B1097, which expired on September 2, 2018. On August 24, 2018, we submitted the application to extend our NMPA certificate. Our application has been received by the NMPA and is currently pending approval. We are allowed to continue manufacturing our products during this period before the NMPA makes a decision on our application for extension.
On May 12, 2010, we received a patent for this product (Patent No. 200610010394.4) under the name “Run Chao” (which has since been changed to “QunLe”) with the National Bureau of Intellectual Property.
Pursuant to a technology transfer agreement dated October 12, 2007 (the “2007 Technology Transfer Agreement”), we purchased a health product known as “Kindlink” brand propolis and black ant capsule made from propolis, black ant, acanthopanax and astragalus root from Beijing Jindelikang Bio-Technology Co., Ltd (“Jindelikang”). The change of the ownership has been approved by the NMPA. This product is intended to boost one’s immunity. The certification number issued by the NMPA on August 20, 2004, for the license to manufacture the product is GuoShiJianZi G20040906. We have no continuing obligations under the 2007 Technology Transfer Agreement.
Pursuant to a technology transfer agreement dated January 18, 2013 (the “2013 Technology Transfer Agreement”), we purchased 12 health products from Guangzhou Aoda Biology Beauty Healthy Technology Co., Ltd, a non-affiliated party. These twelve products are the following:
- Dr. Xiao Brand Honeysuckle Pearl Capsule (Guo Shi Jian Zi G20100656), which is designed to be effective in acne removal;
- Dr. Xiao Brand Multivitamin Tablet (Guo Shi Jian Zi G20080176), which is a multivitamin and mineral supplement;
- Dr. Xiao Brand Zhengdian Capsule (Guo Shi Jian Zi 20070261), which is designed to be effective in relieving eyestrain;
- Dr. Xiao Brand Shengui Capsule (Guo Shi Jian Zi G20080297), which is designed to be effective in increasing bone density;
- Dr. Xiao Brand Multivitamin Tablet (Woman) (Guo Shi Jian Zi G20070338), which is an iron and multivitamin supplement;
- Dr. Xiao Brand Shikong Soft Capsule (Guo Shi Jian Zi 20080096), which is designed to be effective in improving memory;
- Dr. Xiao Brand Huangjingdanggui Tablet (Guo Shi Jian Zi G20080201), which is designed to be effective in improving nutritional anemia and chloasma;
- Dr. Xiao Brand Xingxing Soft Capsule (Guo Shi Jian Zi G20080080), which is designed to be effective in improving memory;
- Dr. Xiao Brand Vitamin A Fish Oil Soft Capsule (Guo Shi Jian Zi G20080406), which is designed to be effective in relieving eyestrain;
- Dr. Xiao Brand Colon Cleanser Granules (Guo Shi Jian Zi G20060061), which is designed to be effective in relaxing bowels and promoting the discharge of lead;
- Dr. Xiao Brand Jianli Soft Capsule (Guo Shi Jian Zi G20050710), which is designed to be effective in increasing immunity and relieving physical fatigue; and
- LB Brand Xinpin Capsule (Guo Shi Jian Zi G20050770), which is designed to be effective in dispelling chloasma.
The major suppliers of raw materials for our products who exceeded 10% of our total purchases in the fiscal years 2021 and 2020 are the following:
Purchases
(in U.S. % of
Name of Supplier Dollars) Purchases
FY2021 Shanxi Yuanshengtai Biotechnology Co. LTD 947,682 39.63 %
Harbin Qianjin Packaging and Printing Co. LTD 524,996 21.95 %
Wudi Zhenkang Biotechnology Co. LTD 391,795 16.38 %
FY2020 Shanxi Yuanshengtai Biotechnology Co. LTD 765,309 27.61 %
Wudi Zhenkang Biotechnology Co. LTD 757,758 27.34 %
Harbin Qianjin Packaging and Printing Co. LTD 585,740 21.13 %
The Company typically signs monthly purchase orders with its major suppliers. All purchase orders with our other suppliers are on similar terms. We shall remit payment to a supplier’s account no later than three business days after receiving raw materials. A supplier shall deliver raw materials no later than three business days after receiving a purchase order. The cost of delivery is borne by the supplier.
(iii) Medical Drugs
HLJ Huimeijia has 21 products with approval numbers issued by the NMPA as following:
English Name
Efficacy
Enema Glycerini
Lubricating laxative. Used for constipation.
Umguentum Acidi Borici Camphoratum
Dermerethistica. Used for chilblain.
Ge Hong Beriberi Water
Dehumidification insecticide. Used for tinea pedis and tinea manuum caused by damp toxin brewing and binding, and other skin diseases caused by enzyme.
Pelvic Inflammation Suppository
Heat-clearing and detoxifying; activating blood to promote menstruation disperse swelling and relieve pain. Used for toxin and blood stasis stagnation in the uterus, distending pain in the lower abdomen, irregular menses, algomenorrhea and leukorrhagia, as well as pelvic inflammation and annexitis with the aforementioned symptoms.
Injury and Paralysis Tincture
Warm channel and expelling cold, promoting blood circulation to arrest pain. Used to relieve pain caused by traumatic injury and sprain.
Indometacin and Furazolidone Suppositories
Anti - inflammatory painkiller. Used to treat acute hemorrhoid, including internal hemorrhoids, external hemorrhoids, mixed hemorrhoids, anal fissure or archosyrinx and relieve pain; Used to ease pain after the operation of anal fissure, archosyrinx or hemorrhoids.
Injury and Rheumatism Relieving Paste
Dispelling rheumatism and relieving pain. Used for headache, rheumatalgia, neuralgia, sprain and muscular soreness.
Refining GouPi Cream
Relaxing tendon, invigorating the circulation of blood, dissipating cold and relieving pain. Used for arthralgia and myalgia, acute contusion, sprain, rheumatalgia, arthralgia, hypochondriac pain, muscular soreness, etc.
Muskiness Pain Relieving Paste
Expelling wind and removing dampness, relaxing the tendons and unblocking collateral. Used for rheumatic arthralgia, low back cold pain, traumatic injury, etc.
English Name
Efficacy
Muskiness Bone Strengthener Paste
Analgesia and anti-inflammatory. Used for rheumatalgia, arthralgia, backache, neuralgia, muscular soreness, sprain and contusion.
Matrine Suppositories
Antibacterial and antiphlogistic drugs. Used for trichomonas and candida vaginitis, chronic cervicitis, pelvic inflammation, etc.
Ethacriding Lactate Solution
Disinfectant and preservative drug. Used for disinfection of traumatic and disinfected wounds.
Triamcinolone Acetonide and Neomycin Paste
Used for neurodermatitis circumscripta and chronic eczema. Also used for small-scale psoriasis.
Double - Coptis Suppository
Course wind and resolving the exterior, heat-clearing and detoxifying. Used for influenza caused by affection of exogenous wind-heat, with symptoms of fever, cough and sore throat. Also used for upper respiratory tract infections and pneumonia, with symptoms of fever, cough and sore throat.
Methylrosanilinium Chloride Solution
Disinfectant and preservative drug.
Iodine Tincture
Disinfectant and preservative drug.
Mercurochrome Solution
Disinfectant and preservative drug.
Hydrogen Peroxide Solution
Disinfectant and preservative drug.
Halcinonide Cream
Grucocorticoid. External use drug only to be used on the skin. Used for dermatoneuritis and psoriasis.
Compound Fluocinonide Tincture
Grucocorticoid. Used for dermatoneuritis and psoriasis.
Policresulen Vaginal Suppository
Anti-microbial and hemostasis drug.
Distribution
We signed a non-exclusive cooperation agreement with the Commercial Bureau of Qing’an County, Heilongjiang on September 17, 2008. Under the agreement, various affiliated companies of the Commercial Bureau provides organic food and green food products to us for distribution and sale throughout the PRC.
We order products from the Commercial Bureau and such products are delivered within 20 days of placing the order. The prices for these products fluctuate within a 3% range from their wholesale price, but we are not restricted in any way in dictating the retail prices for such products. We typically have an average profit margin of approximately 20%.
Most of our products are sold to sales agents. In the fiscal year of 2020, our sales network covered 5 provinces and 2 municipalities in China and our products were mainly sold in Anhui, Zhejiang, Shanghai, Jiangsu, Beijing, Gansu, and Heilongjiang provinces or cities. In the fiscal year of 2021, our sales network covered 5 provinces and 2 municipalities in China and our products were mainly sold in Anhui, Zhejiang, Shanghai, Jiangsu, Beijing, Gansu, and Heilongjiang provinces or cities.
E-business
We are in the process of building the infrastructure to conduct our business over the internet. A B2C e-business call and sales center has been established and will become an integral part of our distribution channel in the future. We have employed graduates from Tsinghua University, Harbin Industry University and Harbin Engineering University to develop the ERP (Enterprise Resource Planning), CRM (Customer Relationship Management) and Office Automation software (“OA Software”) for our e-business. The OA Software has been used in our daily operation. The Company plans to sell its products via internet in the fiscal year of 2022.
Our Customers
We sell most of our products to sales agents, who are our customers. The sales agents sell the products to the end users.
Our customers who contributed more than 10% of our consolidated revenues during the past two fiscal years are as follows:
Sales
(in U.S. Percent of
Name Products Sold Dollars) Sales
FY2021
Libin Wang Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 1,478,558 22.53 %
Yufeng Shen Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 1,185,711 18.07 %
Zhongying Shen Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 1,054,214 16.06 %
Suqin Zhang Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 819,996 12.49 %
Guangmin Meng Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 761,259 11.60 %
FY2020
Libin Wang Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 2,144,817 21.34 %
Yufeng Shen Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 1,715,754 17.07 %
Zhongying Shen Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 1,544,180 15.36 %
Suqin Zhang Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 1,201,115 11.95 %
Guangmin Meng Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide 1,115,207 11.09 %
Manufacture
We manufacture our health food products on a plot of land located in Jin Xing Industrial Park, Songbei District, Harbin. On June 7, 2004, the Company entered into a Land Use Purchase Contract with the local government, pursuant to which the Company agreed to purchase the right to use a piece of land, approximately 8 acres (32,000 square meters), located in Harbin City, Heilongjiang Province for commercial purposes for a fifty-year period from June 7, 2004 through June 6, 2054, for $637,261 (RMB5,248,000). The Company fully paid to the government the consideration for the land use right on June 13, 2004. The Department of Housing and Urban Development of Harbin City approved this transaction. The Company is in the process of applying for the title certificate from the local government. The manufacturing facility on the land is 4,000 square meters and there are five production lines which are sufficient for our purposes. We package our products in bottles, plastic containers and aluminum foil bags there.
Since we acquired HLJ Huimeijia on November 22, 2013, we also manufacture our medicines and drugs using HLJ Huimeijia’s land, approximately 43,350 square meters, located in Hai-lin Economic Development Zone, Mudanjiang City. The manufacturing facilities occupy approximately 5,710 square meters. We plan to build new manufacturing facilities on the land. The expected construction cost is approximately $7,520,000 (RMB 50,000,000).
Our Development Strategy
We will continue to focus on combining our products with traditional Chinese medicine, creating new products such as our hemp-based products, and developing our B2C e-business and chain-stores. We plan to implement health management projects in our future chain-stores throughout China and establish a database of our clients’ health data obtained from our B2C e-business and call center.
We plan to establish a one-stop shop for our customer’s health needs. From conducting a genetic profile of our customer to determine his/her susceptibility to certain types of diseases and then customizing health supplements and organic/green food to meet his/her needs, we plan to cater to our customer’s needs at all levels. With the distribution network we hope to establish through our chain stores and B2C e-businesses, we plan to eventually branch out into the sale and distribution of beauty products and medical appliances.
We plan to open chain stores of up to 100 stores within the next 24 months; expand our oversea sales to North America, South Asia and European Union; acquire pharmaceuticals to enhance marketing network and production capacity and increase investment in research and development of CBD drugs and hemp-based products.
The Future
Within the next ten years, our goals are to:
1. Increase product coverage in target markets; achieve 20%-30% coverage
Our target market is the health industry market. Presently, we believe that our product coverage is approximately 0.2%. We plan to open distribution stores in different provinces of China to expand our coverage. We also plan to sell our products through B2C websites to our customers.
2. Enter into the medicine, health product, health industry top 500 companies in the PRC
Currently, we are not ranked in the top 500 medicine, health product and health industry companies in the PRC. We believe that if our projected increase in revenue is achieved, we will achieve our goal of becoming one of the top 500 medicine, health product, health industry companies in China.
3. Form a diversified management group
Currently, our management group comprises graduates from the most prestigious universities in the PRC, such as Peking University and Renmin University of China. We plan to further diversify our management group by hiring talent both in the PRC and abroad.
4. Enter into the international market and create an internationally famous brand
Currently, our products are sold under the brand names “Qunle”, “Kindlink”, “Huimeijia” and “Dr. Xiao” in the PRC. Our goal is eventually to expand our sales abroad to countries such as the United States of America, Russia, and Eastern Europe and South-east Asian countries.
Our Business Plan
The plans designed to meet our manufacturing, marketing and profit targets include:
Manufacturing:
(a) improving the manufacturing techniques and staff training;
(b) guaranteeing high quality material supply;
(c) strengthening the working procedure controls;
(d) implementing GMP to ensure a compliance standard in the food and medical industries;
(e) ensuring that all employees have adequate training in health regulations.
Marketing:
Adopt an effective marketing strategy to:
(a) utilize direct distribution of products to chain stores nationwide;
(b) build business alliances with well-known enterprises to create private label brands;
(c) expand the marketing of our products beyond the traditional methods.
Product Distribution:
(a) enlarge our sales and marketing force while developing new markets;
(b) strengthen the distribution channel by developing promotion strategies and participating in trade shows;
(c) Develop 3-5 new products to market each year;
(d) develop new markets through innovation and research.
Our approach to manufacturing, marketing, cost control and products distribution, which is detailed above, is designed to minimize production costs and increase revenue at the same time. We feel that our procedures will enable us to reach our sales goals with an optimal manufacturing cost. The result should yield profits and a return to our investors.
Good Manufacturing Practice or “GMP” is a term that is recognized worldwide for the control and management of manufacturing and quality control testing of foods and pharmaceutical products. An important part of GMP is documentation of every aspect of the process, activities, and operations involved with drug and medical device manufacture. Additionally, GMP requires that all manufacturing and testing equipment has been qualified as suitable for use, and that all operational methodologies and procedures (such as manufacturing, cleaning, and analytical testing) utilized in the drug manufacturing process have been validated (according to predetermined specifications), to demonstrate that they can perform their purported function(s). On December 1, 2019 the newly revised Drug Administration Law (the “New Law”) came into effect. One of the major amendments is the cancellation of GMP certification. The New Law eliminated the requirement that drug administration authorities shall assess drug manufacture enterprises and drug trading enterprises, and issue assessment certificates. Instead, it requires that drug manufacturing enterprises and drug trading enterprises establish and improve the quality management systems of manufacture and trade of drugs, and ensure that the process of manufacturing and trading of drugs always meets all legal requirements. This means a stricter form of supervision is implemented comparing to the prior GMP certificates system and our production lines are subject pilot inspection under the New Law.
The Market for Healthcare and Beauty Products
The health product industry is one of the mainstream industries in the PRC, since it has a high level of recognition and importance. Recently there have been new policies for health products, which control quality, manufacturing, manufacturing environments and techniques. With the PRC’s large and aging population there will be a steady demand for healthcare products. It is predicted that the healthcare and beauty industry will flourish over the next 50 years.
The Healthcare Product Market in the PRC
With thousands of years of history in health culture and traditional Chinese medicine, the PRC currently utilizes advanced techniques and production capacity to initiate new health care trends, from drugs and medicines to traditional health food and nutritional supplements, and from medical devices to health management and advice. These trends demonstrate huge potential in the PRC’s health products market.
With the rise of the concept of “Great Health”, the per capita expenditure of health products and the consumer group have been significantly improved. Roland Berger, a global strategy consulting firm headquartered in Munich, Germany, recently released a report entitled Successful Strategies for China’s Health Products Industry in the Thirteenth Five-Year Plan Period. This report analyzed the opportunities and challenges of China’s healthcare product market, and puts forward relevant enterprise development strategies.
Driven by the change of consumer treatment to prevention, the promotion of health awareness, the refinement of health needs and the pursuit of high-quality health products, the market scale of health products in China broke through RMB100 billion in 2014 and nearly RMB150 billion in 2017. Qianzhan Industry Research Institute in China predicted that the market scale of health products in China will reach RMB 243.5 billion in 2025.
Comparing the consumption habits of Chinese and American health products, we can see that there is still much room for development in China’s market. The penetration rate of health products in the United States is 50%, while that in China is only 20%, and in terms of per capita consumption, China is only one-eighth of that in the United States.
Hemp and its Market and Industry in the PRC
Hemp was originated from the middle and lower reaches of Yellow River with over eight-thousand years’ planting history. The hemp textile technology in our country has matured as early as two thousand years in the Western Han Dynasty. “Plain Color Zen Clothing”, coming up from Han Tombs at Mawangdui and other hemp textile products have become the milestone in the developing history of hemp textile technology.
Hemp, also known as Huoma, Xianma, Kuima, Hanma, Dama. Species that containing less than 0.3% of tetrahydrocannabinol (THC) is considered as Hemp, and more than 0.3% is considered as Marijuana and Hashish internationally. Hemp is a kind of economic plant with special effects and can be grown in large areas in all parts of China. It has low requirements for soil and climate and can grow on relatively barren land. Planting hemp has become a way to get rich and get out of poverty in some poor areas.
Hemp is full of treasures. The skin, stem, seed, root, leaf and flower of hemp have utility value which can be widely applied in the fields of textile, paper-making, food, medicine, construction, transportation, national defense and military industry and so on. As a kind of traditional economic plant, hemp fiber has the functions of moisture absorption and perspiration, natural antimicrobial health care, good quality of adsorption, excellent quality of anti-UV and unique wave adsorption and sound attenuation. The stem of hemp has high degree of lignification and can be used to produce high value biologic additives, viscose fibers, top grade cigarette paper and wooden ceramics and so on. The leaf and flower of hemp can be used to produce various kinds of health products and the seed of hemp can be used to manufacture top grade edible oil, essential oil and hemp protein.
A hemp plant contains over 400 kinds of chemical components and can be divided into cannabinoid and non-cannabinoid compounds. Cannabinol (CBN) in cannabinoid has the functions of anti-inflammatory, analgesia, anti-convulsion and suppressing female hormone secretion. Cannabidiol (CBD) has the functions of anti-inflammatory, sterilization, analgesia, antianxiety, antipsychotic, antioxidation, neural protection, reducing enterocinesia and improving learning and memory ability.
Hemp is the major high-yielding crop of making traditional fiber products in China. It is a kind of high value-added economic crop with a wide range of uses and multi-purpose crop with market prospects that provides fiber, hemp stem and seed. Hemp has many unique natural characteristics, especially its environmental benefits and its natural versatility, which is a valuable kind of crop for ecological economy.
Textiles, clothing, military industry, construction materials, food, medicines, health supplements, cosmetics and skin care products of the downstream of hemp industry in China are relatively well-developed. The bottleneck that restricts the development of downstream industries is that the cultivation of hemp in the upstream has long been the planting mode of scattered peasant households, and has not formed large-scale industrialized cultivation and local initial processing capacity.
After years of development, Chinese consumers have gradually rationalized their attitude and behavior in the consumption of health care products, paying more attention to the safety and efficacy of health care products. At the same time, the government has gradually improved the laws and regulations of the health care industry and tightened its supervision.
The rejuvenation of the modern industry of hemp resulted from the major breakthrough in research and mass production of hemp. Firstly, cultivate new varieties of hemp with low activity of anesthetic in agricultural scientific research. The main component of these varieties of anesthetics is THC and the content of THC is controlled at 0.3% which approximates to non-toxicity. This has led to a renewed understanding and affirmation of the industrial use of hemp, and made the cultivation of hemp mechanize, effectively contributing to the development of hemp industry.
In order to meet the needs of the development of domestic and foreign market, China has successively reactivated the hemp industry projects in Yunnan, Heilongjiang, Shandong, Shanxi, Anhui and Hubei provinces to set up factories and scientific research institutes to carry out research and development of various products. The natural functional advantages of its related products are favored by consumers at home and abroad. The products are exported to countries such as the United States, Canada, Australia, Japan, and Korea. Currently, related products of hemp have also become an export-oriented pillar industry in China.
At present, on the basis of solving scientific and technological problems of deep degumming of hemp, extraction of fine fiber, extraction of CBD, purification of hemp seed oil, extraction of essential oil of hemp, extraction of hemp protein, biocomposites, fiber reinforced composite materials, carry out pilot plant test and industrialized mass production of related products of hemp, and gradually develop the deep comprehensive utilization of hemp products, demonstrating the strength of deep processing in the hemp industry.
Competition in the Healthcare Products Industry
We believe our competitors are:
Harbin DaZhong Pharmaceutical Co., Ltd.(Located in Harbin, Heilongjiang Province);
Tsinghua Unisplendour Corporation Limited (Located in Weihai City, Shandong Province);
Heilongjiang Tianlong Pharmaceuticals Co., Ltd (Located in Heilongjiang Province); and
HPGC Renmintongtai Pharmaceuticals Co., Ltd (Located in Heilongjiang Province).
Yunnan Hansu Biotechnology Co., Ltd. (Located in Yunnan Province)
Our Competitive Advantages and Strategy
We believe that we have the following advantages over our competitors:
● We have more categories of products and a diversified production line;
● We have a strong and effective research and development team;
● We are a self-owned enterprise, and have the support of the local government; and
● We have a geographical advantage being located in Heilongjiang Province, the center of the healthcare industry in the PRC.
Sales and Marketing
We plan to open more chain stores throughout the PRC. Customers of our stores would be able to enjoy discounts on the price of our products and services. After establishing a sufficient number of stores, we plan to develop a 24-hour delivery system for our B2C e-business.
Intellectual Property
We received a patent (200610010394.4) for our “Qunle” brand Sailuozhi soft capsule from the National Bureau of Intellectual Property. We had initially applied for and used the trade name of “RunChao” soft capsules, but the trade name was changed to “Qunle”, and the change was approved by the National Bureau of Intellectual Property.
Pursuant to a Technology Transfer Agreement dated October 12, 2007 (“Kindlink Technology Transfer Agreement”), we purchased, for a total of RMB350,000, the technology, manufacturing, and trademark rights to the health product known as “Kindlink” brand propolis and black ant capsule made from propolis, black ant, acanthopanax, astragalus root from Jindelikang. The change of the ownership was approved by the NMPA. This product is consumed to boost one’s immunity. The certification number issued by the NMPA on August 20, 2004, to permit the manufacture of the product is GuoShiJianZi G20040906. We have no continuing obligations under the Kindlink Technology Transfer Agreement.
As of the date of this report, we have registered the following 14 trademarks(1):
Certificate
Trademark No. Category Registrant Valid Term
“Qunle” No.5 : Food preparations adapted for medical purposes; Albuminous milk; Dietetic beverages adapted for medical purposes; Milk sugar; Diabetic bread; Albuminous foodstuffs for medical purposes; Food for babies; Dietetic substances adapted for medical use; Nutritional additives for medical purposes Humankind 7/7/2016 to 7/6/2026
“Wangzu” No.30: Molasses for food; Honey; pollen healthy grease; tortoise tuchahoe paste; breed columbine extract; helix alga; non-medical nutrition liquid; non-medical nutrition powder; non-medical nutrition capsule; sugar candy bird’s nest Humankind 5/14/2008 to 5/13/2028
“Kindlink” No.5: Food preparations adapted for medical purposes; Dietetic substances adapted for medical use Humankind 12/7/2013 to 12/06/2023
“Huimeijia” No.5 : Medicine for human consumption; Medical nutrition capsule; Fibres (Edible plant) [non-nutritive]; Injection; Raw material drug; Troche; suppository; Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted for medical use Humankind 7/21/2019 to 7/20/2029
“Huide” No.5 : Medicines for human consumption; Medical nutrition capsule; Fibres (Edible plant) [non-nutritive]; Injection; Raw material drug; Troche; suppository; Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted for medical use Humankind 7/21/2019 to 7/20/2029
“KDLK”
No.5 : Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted for medical use
Humankind
9/28/2013 to 9/27/2023
“dr.xiao”
No.5 : Disinfectant; Medicines for veterinary purposes; Insecticide; Sanitary napkin; Medicine health bag; Dental lacquer
Humankind
8/14/2019 to 8/13/2029
“dr.xiao”
No.30: non-medical nutrition liquid; non-medical nutrition cream; non-medical nutrition powder; Honey; non-medicial nutrition capsule; non-medical nutrition gum; Candy for food; Spirulina (non-medical nutrient); Candy; Pollen healthy grease
Humankind
7/28/2011 to 7/27/2031
“DaLeNing”
No.5 : Medicine for human; Chinese patent drugs; Suppository; Tincture; Water aqua; Paste; Liniment; Medical lotion; Patch; Chemical pharmaceuticals preparations
HLJ Huimeijia
5/7/2019 to 5/6/2029
“Xuedu”
No.5 : Medicine for human; Chinese patent drugs; Suppository; Tincture; Water aqua; Paste; Liniment; Medical lotion; Patch; Chemical pharmaceuticals preparations
HLJ Huimeijia
5/7/2019 to 5/6/2029
“Xuedu” with an image
No.5 : Paste
HLJ Huimeijia
5/21/2013 to 5/20/2023
“Tai Yan Li”
No.30: Honey, spirulina (non-medical), non-medical nutrient solution, non-medical nutrient lotion, non-medical nutrient powder, non-medical nutrient capsule, pastry, cereal, flour product.
Humankind
11/28/2012 to 11/27/2022
“Tai Yan Li”
No. 3: Cleanser lotion, soup, anti -bacterial hand soup, cleanser, cosmetics, conditioning gel, polish, essential oil.
Humankind
11/28/2012 to 11/27/2022
“Luo Qian’
No. 3: essential oil, fragrance essential oil, nourishing essential oil, cosmetic mask, cosmetic tools, cosmetics, cosmetic cleanser, perfume, weight-losing cosmetics, banishing essence.
Humankind
6/14/2011 to 6/13/2031
(1) The trademarks listed here have been spelt in Pinyin for the U.S. readers’ convenience. The original trademarks are in Chinese characters.
In addition, the trademark of “LB” and its associated image under the registration number 1738881 was transferred to us on March 19, 2015 from Guangzhou Aoda Biology Beauty Healthy Technology Co., Ltd, from whom we acquired 12 health products in January 2013.
We have the right to use the following patents under the approval of National Bureau of Intellectual Property:
Patent
Categories
Name
Inventor/Designer
Patent No.
Duration
Owner
Invention Patent
Runchao Soft Capsule and Its Manufacturing Method
Xin Sun
ZL200610010394.4
August 10, 2006-
August 9, 2026
Xin Sun*
Utility Patent
Heating System in Compression Coaster with Coating Wheels
ZhengJiang Huang
ZL201220485432.2
September 22, 2012- September 21, 2022
HLJ Huimeijia
Design Patent
Packing Box for Pain- relieving Ointment
Jianjun Wang
ZL201230448116.3
September 19, 2012- September 18, 2022
HLJ Huimeijia
Design Patent
Packing Box for Nasal Mucus-releiving Ointment
Jianjun Wang
ZL201230448676.9
September 19, 2012- September 18, 2022
HLJ Huimeijia
Design Patent
Packing Box for Gou Pi Plaster
Jianjun Wang
ZL201230447952.X
September 19, 2012- September 18, 2022
HLJ Huimeijia
Design Patent
Packing Box for Tendons and Bones Strengthening Musk Ointment
Jianjun Wang
ZL201230448670.1
September 19, 2012- September 18, 2022
HLJ Huimeijia
Design Patent
Packing Box for Pain- relieving Musk Ointment
Jianjun Wang
ZL201230448010.3
September 19, 2012- September 18, 2022
HLJ Huimeijia
* Mr. Sun verbally authorized the Company the right to use the patent.
The following is a list of our patent applications:
The applicant of all the following patens is Humankind, with their inventor being Mr. Xin Sun. In March 2017, we submitted the below patent applications which are currently in the reviewing process and pending for approval.
Serial No. Name Application Technology Field
Cannabidiol (CBD) Cataplasmata Cannabidiol (CBD) is used for relieving muscle pain and its preparation method. The invention belongs to the research and application field of industrial hemp and relates to a kind of cataplasmata, in particular to Cannabidiol (CBD) which is used for relieving muscle pain and its preparation method.
Cannabidiol (CBD) Suspension Cannabidiol (CBD) Suspension is used for treating arthritis and its preparation method. The invention relates to the field of pharmaceutical preparations, in particular to a kind of Cannabidiol (CBD) Suspension which is used for treating arthritis and its preparation method.
Cannabidiol (CBD) Gel Cannabidiol (CBD) Gel has the effect of relieving nervous headache and its preparation method. The invention relates to gel preparations for medicine, in particular to a kind of Cannabidiol (CBD) Gel which has the effect of relieving nervous headache and its preparation method.
Cannabidiol (CBD) Paste Cannabidiol (CBD) Paste has the effect of relieving swelling and pain and its preparation method. The invention relates to the field of medicine, in particular to a kind of Cannabidiol (CBD) Paste which has the effect of relieving swelling and pain and its preparation method.
Cannabidiol (CBD) Soft Capsule Cannabidiol (CBD) Soft Capsule has the effect of improving diabetes and its preparation method. The invention relates to the field of soft capsule, in particular to a kind of Cannabidiol (CBD) Soft Capsule which has the effect of improving diabetes and its preparation method.
Cannabidiol (CBD) Suppository Cannabidiol (CBD) Suppository has the effect of heat sterilization and its preparation method. The invention relates to the field of medicine, in particular to a kind of Cannabidiol (CBD) Suppository which has the effect of heat sterilization and its preparation method.
Cannabidiol (CBD) Plaster Cannabidiol (CBD) Rubber Plaster has the effect of treating old bone disease and its preparation method. The invention relates to the field of medical plaster, in particular to a kind of Cannabidiol (CBD) Rubber Plaster which has the effect of treating old bone disease and its preparation method.
Cannabidiol (CBD) Rubber Plaster Cannabidiol (CBD) Rubber Plaster has the effect of dispelling wind and eliminating dampness and its preparation method. The invention relates to the field of medical plaster, in particular to a kind of Cannabidiol (CBD) Rubber Plaster which has the effect of dispelling wind and eliminating dampness and its preparation method.
Cannabidiol (CBD) Liquid Pharmaceutical Preparations Cannabidiol (CBD) Liquid Pharmaceutical Preparations has the anti-anxiety effect and its preparation method. The invention relates to the field of liquid pharmaceutical preparations, in particular to a kind of Cannabidiol (CBD) Liquid Pharmaceutical Preparations which has the anti-anxiety effect and its preparation method.
Moisturizing Cream with Hemp Seed Oil Moisturizing Cream with Hemp Seed Oil and its preparation method. The invention relates to the field of cosmetics, in particular to a kind of Moisturizing Cream which contains hemp seed oil and its preparation method.
The laws governing our business are as follows:
● Pharmaceutical administration law of the PRC enacted January 12, 2001
● Healthcare registration and administration law, enacted January 7, 2005
● Measures for the Administration of Pharmaceutical Trade License, enacted January 4, 2004
● Measures for the Supervision Over and Administration of Pharmaceutical Production, enacted May 8, 2004
● Food Safety Law of the PRC, enacted June 1, 2009
● Regulation on the Implementation of the Food Safety Law of the PRC, enacted July 20, 2009
● Regional regulation: Heilongjiang Regional Medicinal Materials Resource Protection Bylaw, enacted January 8, 2005
● Good Manufacturing Practice (GMP) Amendment, enacted January 17, 2011
● Hemp Industry 3-year Special Action Plan of Heilongjiang Province (2018-2020) and
● Hemp Legislation of Heilongjiang Province in May 2017.
In the PRC, a Good Manufacturing Practice Certification (“GMP Certification”) is required for companies that produce medical drugs and health supplements. It is also required to market our medical drugs and health supplements. According to the Administrative Rules of Drug Manufacturing and Certification issued by the NMPA of the PRC on September 7, 2005, the NMPA is responsible for the review and issuance of GMP Certification. To obtain a GMP Certification, a company shall submit its application; the NMPA will then conduct a technical review of the application materials; if such company passes the technical review, the NMPA will inspect the manufacturing site. The NMPA also conducts follow-up inspections on the manufacturing site. After the issuance of the GMP Certification, the NMPA may inspect the manufacturing site from time to time. However, instead of issuing GMP, the NMPA now issues SC Permit to food manufacturers in China, allowing them to manufacture and sell health products. The GMP Certifications of our wholly owned subsidiaries, Humankind, HLJ Huimeijia, are valid through February 14, 2019 and December 31, 2015, respectively. For the GMP Certificate of HLJ Huimeijia, the Company applied for a new certificate, which was obtained on April 25, 2018. Since obtaining the GMP Certification, we have been able to manufacture and market our products without further governmental approval. As Humankind is in the business of manufacturing and selling health products, it is considered as a food manufacturer in China. Humankind received its SC Permit on July 26, 2018, which will expire on September 12, 2021.The Company has applied for extension which is expect to be approved at the end of October 2021. On December 1, 2019 the newly revised Drug Administration Law (the “New Law”) came into effect. One of the major amendments is the cancellation of GMP certification. The New Law eliminated the requirement that drug administration authorities shall assess drug manufacture enterprises and drug trading enterprises, and issue assessment certificates. Instead, it requires that drug manufacturing enterprises and drug trading enterprises establish and improve the quality management systems of manufacture and trade of drugs, and ensure that the process of manufacturing and trading of drugs always meets all legal requirements. This means a stricter form of supervision is implemented comparing to the prior GMP certificates system and our production lines are subject pilot inspection under the New Law.
Employees
As of June 30, 2021, we have 49 full-time employees including 6 officers, 10 administrators, 13 workers, 7 technicians, 8 marketing personals and 5 accountants. Besides, we have 19 sales persons as part-time employees. We believe that we are in compliance with local prevailing wage, contractor licensing and insurance regulations, and have good relations with our employees.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
We are a smaller reporting company and therefore this item is not applicable to us.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties.
All land belongs to the state in PRC. Enterprises and individuals can pay the state a fee to obtain a right to use a piece of land for commercial purpose or residential purpose for an initial period of 50 years or 70 years, respectively. The land use right can be sold, purchased, and exchanged in the market. The land use right of a successor owner will be reduced by the amount of time consumed by the predecessor owner.
We manufacture our products on a plot of land located in Jin Xing Industrial Park, Songbei District, Harbin. On June 7, 2004, the Company entered into a Land Use Purchase Contract with the local government, pursuant to which the Company agreed to purchase the right to use a piece of land, approximately 8 acres (32,000 square meters), located in Harbin County, Heilongjiang Province for commercial purposes for a fifty-year period from June 7, 2004 through June 6, 2054, for $637,261 (RMB 5,248,000). The Company fully paid to the government the consideration for the land use right on June 13, 2004. The Department of Housing and Urban Development of Harbin City approved this transaction. The Company is in the process of applying for the title certificate from the local government. Due to certain re-zoning conducted by the local government, the estimate time to receive the title certificate is uncertain. The Company is striving to accelerate the process. The manufacturing facility on the land is 4,000 square meters and there are five production lines which are sufficient for our operation. We package our products in bottles, plastic containers and aluminum foil bags.
Since we acquired HLJ Huimeijia on November 22, 2013, we also manufacture our medicines and drugs using HLJ Huimeijia’s land, approximately 43,350 square meters, located in Hai-lin Economic Development Zone, Mudanjiang City. The manufacturing facilities occupy approximately 5,710 square meters. We plan to build new manufacturing facilities on the land. The expected construction cost is approximately $7,520,000 (RMB 50,000,000).

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
We do not know of any material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
This item is not applicable to us.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is quoted over-the-counter on the OTC Markets PK Tier under the ticker “CHHE” and the market for the stock has been relatively inactive. The quotations on the OTC Markets reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.
As of September 3, 2021, we had approximately 502 shareholders of record of our common stock, such number of holders does not include street name holders who hold shares by brokerage firms. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.
Dividends
We have not paid dividends on our common stock and do not anticipate paying such dividends in the foreseeable future. We will rely on dividends from Humankind for our funds and PRC regulations may limit the amount of funds distributed to us from Humankind, which will affect our ability to declare any dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
On March 27, 2015 the Board of Directors (the “Board”) adopted the Company’s 2015 Equity Incentive Plan (the “Plan”), which became effective as of such date. The total number of authorized shares under the Plan is 6,000,000 shares of common stock.
The following table summarizes the number of shares of our common stock authorized for issuance under our Plan as of June 30, 2021.
Equity Compensation Plan Information
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a) Weighted-average exercise price of outstanding options, warrants and rights
(b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
(c)
Equity compensation plans approved by security holders - - -
Equity compensation plans not approved by security holders - - 2,700,000 (1)
Total
2,700,000
(1) The Company granted an aggregate of 3.3 million shares of restricted shares to its CEO and an employee on March 30, 2015. The shares of the Company are quoted on the OTC Markets. As a result, no security holders’ approval is required for the Company’s adoption of an equity compensation plan.
Registrar and Stock Transfer Agent
Our stock transfer agent is Direct Transfer LLC at 1981 Murray Holladay Road, Suite 100, Salt Lake City, UT 84117. Their telephone number is (801) 272-9294, and their fax number is (801) 277-3147.
Shares Eligible for Future Sale
There is no active trading market for our common stock. Future sales of substantial amounts of our common stock in the trading market could adversely affect market prices.
Penny Stock Regulations
Our shares of common stock are subject to the “penny stock” rules of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and various rules thereunder. In general terms, “penny stock” is defined as any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, issued by a registered investment company, and excluded from the definition on the basis of price (at least $5.00 per share), or based on the issuer’s net tangible assets or revenues. In the last case, the issuer’s net tangible assets must exceed $3,000,000 if in continuous operation for at least three years or $5,000,000 if in operation for less than three years or the issuer’s average revenues for each of the past three years must exceed $6,000,000.
Trading in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock, to the extent it is penny stock, and may affect the ability of shareholders to sell their shares.
Recent Sale of Unregistered Securities
None.
Repurchase of Equity Securities
None.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 the SEC 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 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 report to “we”, “us”, “our”, “the Registrant”, “our Company”, or “the Company” are to China Health Industries Holdings, Inc., a Delaware corporation, China Health Industries Holdings Limited, a limited liability company incorporated under the laws of Hong Kong, its wholly owned subsidiary in China, 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 to the People’s Republic of China; (ii) “U.S. dollar,” “$” and “US$” are to United States dollars; (iii) “RMB” are to Renminbi Yuan 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.
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, oral liquid forms. These products address the needs of some key sectors in China, including the feminine, geriatric, and children’s markets.
HLJ Huimeijia was founded on October 30, 2003 and its latest GMP certificate is effective until April 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 was Heilongjiang 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 in Heilongjiang Province, a northeastern province of China.
We have developed the following products that are derived from hemp and obtained business license to manufacture and sell these products. We have begun to sell these products since May 2018. Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide are sold through Humankind. Other products are sold through HLJ Huimeijia. The revenue of the Hemp Oil, Hemp Protein Powder and Hemp Polypeptide accounted for 89.88% and 80.4% of the total revenues for the fiscal year of 2021 and 2020, respectively.
Serial No.
Name
Hemp Oil
Hemp Protein Powder
Hemp Polypeptide
Collagen Peptide
Natural Hemp Essence Repair Lotion
Natural Hemp Revitalizing Essence
Natural Hemp Anit-aging Brightening Eye Cream
Natural Hemp Frozen Age Nourishing Cream
We sell our products directly to end customers through our own sales personnel as well as our sales agents, operating primarily in Anhui, Zhejiang, Shanghai, Jiangsu, Beijing and Gansu, where most of our revenues are generated. Sales by agents in Anhui, Zhejiang, Shanghai, Jiangsu, Beijing, and Gansu provinces accounted for 23%, 18%, 16%, 13%, 12%, and 9%, of our total sales, respectively, for the fiscal year 2021. Although we do not currently sell our products online, we expect to do so in the future.
Outlook
Overall, we anticipate our total revenues for the year ended June 30, 2022 versus the year ended June 30, 2021 to increase by 30% or approximately $2 million, with growth in all categories of our product sales, including the anticipated revenue from Humankind for approximately $7 million, mainly in the sales growth of hemp-based products, and from HLJ Huimeijia for approximately $1.5 million. The gross profit margin for the year ended June 30, 2022 is expected to be approximately 56%, and we estimate our overall net profit margin for the year ended June 30, 2022 to be approximately 20%. There is, however, no assurance that we will reach these projections.
The COVID-19 global pandemic has adversely affected our business in a short run. However, in the long run, we endeavor using our expertise to help humankind fight against the pandemic. We sell products such as Hemp Protein Powder and Hemp Polypeptide to help people improve their immune system. As the COVID-19 continues to spread and people’s awareness and knowledge of the virus continue to increase, consumers realized that strengthening their own immunity and resistance powers is among the most effective ways to fight against COVID-19, and consumers will pay more attention to strengthen the physical fitness, and therefore use more protein powder, protein peptides and other health foods and supplements. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the economy of China, U.S. and the rest of the world and, as such, the extent of the business disruption and the related financial impact cannot be reasonably estimated at this time.
Results of Operations
The following table summarizes the top lines of the results of our operations for the years ended June 30, 2021 and 2020, respectively:
June 30,
June 30,
Variance %
Revenues $ 6,492,720 $ 9,931,887 $ (3,439,167 ) (34.6 )%
Humankind 6,475,966 9,891,878 (3,415,912 ) (34.5 )%
HLJ Huimeijia 16,754 40,009 (23,255 ) (58.1 )%
Cost of Goods Sold $ 2,850,729 $ 2,657,044 $ 193,685 7.3 %
Humankind 2,754,413 2,610,147 144,266 5.5 %
HLJ Huimeijia 96,316 46,897 49,419 105.4 %
Gross Profit $ 3,641,991 $ 7,274,843 $ (3,632,852 ) (49.9 )%
Humankind 3,721,553 7,281,731 (3,560,178 ) (48.9 )%
HLJ Huimeijia (79,562 ) (6,888 ) (72,674 ) 1,055.1 %
Revenue
Total revenues of the Company decreased by $3,439,167 or 34.6%, for the year ended June 30, 2021 as compared to the year ended June 30, 2020. The decrease in revenues was primarily due to a decrease of $3,415,912 or 34.5% in Humankind’s revenues and a decrease of $23,255 or 58.1% in HLJ Huimeijia’s revenues for the year ended June 30, 2021 as compared to the year ended June 30, 2020. The decrease in Humankind’s sales revenues was primarily due to discounts on major products.
Our total cost of sales increased by $193,685 or 7.3% for the year ended June 30, 2021 as compared to the year ended June 30, 2020. The increase in the overall cost of sales was attributable to an increase of $144,266 or 5.53% in Humankind’s cost of sales, in 2021 as compared to the year ended June 30, 2020. This increase is mainly due to the increased sales volume of Hemp Protein Powder. The unit cost remained unchanged and therefore total cost of sales increased.
Our gross profit decreased by $3,632,852 from $7,274,843 for the year ended June 30, 2020 to $3,641,991 for the year ended June 30, 2021.
Sales by Product Line
The following table summarizes a breakdown of our sales by major product line for the years ended June 30, 2021 and 2020, respectively:
June 30, 2021 June 30, 2020
Quantity Sales % Quantity Sales %
(Unit) US$ of (Unit) US$ of
Humankind
Propolis and Black Ant Capsule - - - - - -
Waterlilies Soft Capsule (Sailuozhi) - - - - - -
Hemp Oil 110,781 $ 2,288,807 35.0 % 122,047 $ 3,968,909 40.0 %
Collagen Peptide 51,632 640,779 9.9 % 88,643 1,905,157 19.2 %
Hemp Polypeptide 98,873 2,042,666 31.5 % 90,314 2,695,140 27.1 %
Hemp Protein Powder 121,245 1,503,714 23.2 % 69,471 1,322,672 13.3 %
HLJ Huimeijia
-
-
Natural Hemp Cosmetics
- 1,568 -
Muskiness Bone Strengthener Paste 108,496 10,016 0.2 % 72,164 19,596 0.2 %
ShangBiTongDing
- % -
Indometacin and Furazolidone Suppositories - 2,440 2,288 -
Enema Glycerini
- 8,480 -
Ge Hong Beriberi Water
- -
-
Umguentum Acidi Borici Camphoratum
- -
-
Injury and Rheumatism Relieving Paste 26,838 3,375 0.1 % 33,094 8,814 0.1 %
Refining GouPi Cream 30,550 3,347 0.1 % 19,476 6,127 0.1 %
Natural Hemp supplies -
- -
-
Total
$ 6,492,720 100.0 %
$ 9,931,887 100.0 %
Operating Expenses
The following table summarizes our operating expenses for the years ended June 30, 2021 and 2020, respectively:
June 30,
June 30,
Variance %
Operating Expenses
Selling, general and administrative $ 1,168,385 $ 1,781,680 $ (613,295 ) (34 %)
Depreciation and amortization 609,698 601,068 8,630 (1 %)
Total Operating Expenses $ 1,778,083 $ 2,382,748 $ (604,665 ) (25 %)
Total operating expenses for the year ended June 30, 2021 declined by $604,665 or 25%, as compared to the corresponding period in 2020. The decrease in operating expenses was primarily attributable to a decrease of $613,295 or 34% in selling, general and administrative expenses. The decrease in selling, general and administrative expenses was mainly due to the decrease of revenue, the employees' salaries decreased, and the related expenses decreased accordingly.
Interest Income and Interest Expenses
Interest income was $137,485 for the year ended June 30, 2021, as compared to $125,627 for the year ended June 30, 2020. This increase of $11,858, or 9%, was primarily due to the increased deposits in the bank compared with the year ended June 30, 2020.
Interest expense was $nil for the year ended June 30, 2021, a decrease of $1 or 100%, as compared to $1 for the year ended June 30, 2020.
Income Taxes
Income taxes decreased by $735,899, or 50%, from $1,466,360 for the year ended June 30, 2020 to $730,461 for the year ended June 30, 2021. This decrease of income tax expense incurred in the fiscal year ended June 30, 2021 was primarily due to the decrease of net profits before income taxes.
Net Income (Loss) and Net Income per Share
Net income after provision for income taxes decreased to $1,291,122, a decrease of $2,259,488 for the year ended June 30, 2021, as compared to $3,550,610 for the year ended June 30, 2020. The decrease was primarily due to the decrease of gross and net margin.
Net income per share was $0.0197 for the year ended June 30, 2021 and net income per share was $0.0542 for the year ended June 30, 2020. This decrease was primarily a result of the above decrease in net income from the Company’s operations.
Liquidity and Capital Resources
We believe our current working capital position, together with our expected future cash flows from operations, 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 position, our working capital, and our cash flow activity as of the fiscal years ended June 30, 2021 and 2020:
For the years ended June 30:
Cash and cash equivalent $ 44,346,744 $ 36,072,474
Working capital $ 38,617,377 $ 33,223,104
Inventories, net $ 761,639 $ 807,351
For the years ended June 30:
Cash provided by (used in):
Operating activities $ 5,556,694 $ 2,404,978
Investing activities $ (13,655 ) $ (151,969 )
Financing activities $ - $ -
Cash and cash equivalents increased by $8,274,270 from $36,072,474 as of June 30, 2020 to $44,346,744 as of June 30, 2021.
Our working capital on June 30, 2021 was $38,617,377, compared to working capital of $33,223,104 at June 30, 2020. This increase of $5,394,273 or 16% was primarily attributable to the increase of cash and cash equivalents in the amount of $8,274,270 and decrease in accounts receivable in the amount of $2,284,994.
Net cash provided by operating activities was $ 5,556,694 for the year ended June 30, 2021, compared to $2,404,978 for the year ended June 30, 2020. The increase of $3,151,716 in the net cash provided by operating activities was primarily attributable to the $2,259,488 decrease in net income and $274,526 in amounts due to related parties which were offset by decrease of accounts receivable in the amount of $5,378,568, advanced to suppliers and prepaid expenses in the amount of $241,945. Other items had no significant changes.
Net cash used in investing activities was $13,655 for the year ended June 30, 2021, compared to $151,969 for the year ended June 30, 2020, primarily due to the decrease of expenditure in construction in progress in the amount of $128,019.
Net cash provided by financing activities was $nil for both years ended June 30, 2021 and 2020.
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 or 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 of $8,079,761 as of June 30, 2021, as compared to $7,259,862 as of June 30, 2020, an increase of $819,899 or 11.3%. The amount of related party debts mainly consists of a loan from Mr. Xin Sun, the CEO of the Company. The loan is unsecured and non-interest bearing and has no fixed terms of repayment. There was no written agreement for the loan. See Note 9.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are currently material or reasonably likely to be material to our financial position or results of operations.
Critical Accounting Policies and Estimates
We regularly evaluate the accounting policies and estimates that we use to make budgetary and financial statement assumptions. A complete summary of these policies is included in Note 2 to our consolidated financial statements, “Significant Accounting Policies”, and is incorporated herein by reference. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
The financial statements required by this item are set forth beginning on page.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Income (Loss) For the Years Ended June 30, 2021 and 2020
Consolidated Statements of Equity For the Years Ended June 30, 2021 and 2020
Consolidated Statements of Cash Flows For the Years Ended June 30, 2021 and 2020
Notes to Consolidated Financial Statements -
Report of Independent Registered Public Accounting Firm
To: The Board of Directors and Shareholders of
China Health Industries Holdings, Inc.
Opinion of the Financial Statements
We have audited the accompanying consolidated balance sheets of China Health Industries Holdings, Inc. and its subsidiaries (the “Company”) as of June 30, 2021 and 2020, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for each of the years in the two-year period ended June 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Accounts Receivable
As described in Notes 2 and 4 to the consolidated financial statements, the Company records an allowance for doubtful accounts when it determines that it is probable a receivable has been impaired, and the Company can reasonably estimate the amount of the incurred loss. This estimate is based on specific customer credit risk and credit evaluations. We identified the allowance for doubtful accounts as a critical audit matter.
The principal considerations for our determination that the allowance for doubtful accounts is a critical audit matter include the high degree of estimation uncertainty resulting from significant management judgment. There is also a high degree of subjectivity in management's assessment of the reasonableness of the allowance for doubtful accounts, specifically the portion of the receivable expected to be collected, which requires a heightened level of auditor judgement in auditing the estimate. Variations to this estimate could have a significant impact in the allowance recorded.
Our audit procedures related to the allowance for doubtful accounts included the following, among others:
● We tested the design and operating effectiveness of controls relating to the allowance for doubtful accounts, including identification and monitoring of accounts receivable for impairment.
● We obtained management’s assessment and calculation of the allowance for doubtful accounts, inquired of any known events that could impact the allowance calculation and obtained and inspected a sample of supporting documentation, such as legal documents, settlement agreements and other communications to corroborate management’s basis for recording an allowance.
● We analyzed the changes in allowance by customer between years to understand the nature of the increase or decrease.
● We performed a historical lookback analysis of receivables in litigation or bankruptcy to evaluate historical collection percentages used in management’s allowance analysis.
● We tested a sample of aged customer balances that had not been reserved, and inspected subsequent payments made by customers and communications between management and the customers, to evaluate the completeness, and accuracy and valuation of the allowance for doubtful accounts.
/s/ Centurion ZD CPA & Co.
Centurion ZD CPA & Co.
We have served as the Company’s auditor since 2017.
Hong Kong, China
September 20, 2021
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Audited)
June 30,
June 30,
ASSETS
Current assets
Cash and cash equivalents $ 44,346,744 $ 36,072,474
Accounts receivable, net 2,346,867 4,631,861
Inventory 761,639 807,351
Other receivables, net 32,850 32,255
Advances to suppliers 218,307 205,650
Prepayments 24,466 41,505
Total current assets $ 47,730,873 $ 41,791,096
Property, plants and equipment, net 3,629,905 3,677,798
Intangible assets, net 1,963,516 2,249,614
Construction in progress 560,910 511,664
Deferred tax assets 2,933 5,806
Prepayments - Non-Current -
-
Total assets $ 53,888,137 $ 48,235,978
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses 406,821 406,228
Other payables 81,449 63,271
Advances from customers 150,504 137,543
Related party debts 8,079,761 7,259,862
Wages payable 218,602 275,982
Taxes payable 176,359 425,106
Total current liabilities $ 9,113,496 $ 8,567,992
Equity
Common stock, ($0.0001 par value per share, 300,000,000 shares authorized, 65,539,737 and
65,539,737 shares issued and outstanding as of June 30, 2021 and June 30, 2020, respectively) 6,554 6,554
Additional paid-in capital 521,987 521,987
Accumulated other comprehensive income 2,156,792 (1,658,741 )
Statutory reserves 38,679 38,679
Retained earnings 42,050,629 40,759,507
Total stockholders’ equity $ 44,774,641 $ 39,667,986
Total equity $ 44,774,641 $ 39,667,986
Total liabilities and equity $ 53,888,137 $ 48,235,978
The accompanying notes are an integral part of these consolidated financial statements.
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Audited)
For the Year Ended
June 30,
June 30,
REVENUE $ 6,492,720 $ 9,931,887
COST OF GOODS SOLD 2,850,729 2,657,044
GROSS PROFIT 3,641,991 7,274,843
OPERATING EXPENSES
Selling, general and administrative expenses 1,168,385 1,781,680
Depreciation and amortization expenses 609,698 601,068
Total operating expenses 1,778,083 2,382,748
INCOME FROM OPERATIONS 1,863,908 4,892,095
OTHER INCOME/(EXPENSES)
Interest income 137,485 125,627
Interest expense -
(1 )
Other income, net 20,972
Bank charges (782 ) (796 )
Total other income, net 157,675 124,875
INCOME 2,021,583 5,016,970
Provision for income taxes (730,461 ) (1,466,360 )
NET INCOME 1,291,122 3,550,610
The accompanying notes are an integral part of these consolidated financial statements.
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Audited) (CONTINUED)
For the Year Ended
June 30,
June 30,
Foreign currency translation adjustment 3,815,533 (1,065,087 )
COMPREHENSIVE INCOME $ 5,106,655 $ 2,485,523
Net income per share:
Net income per share Basic & diluted $ 0.0197 $ 0.0542
Weighted average shares outstanding:
Basic & diluted 65,539,737 65,539,737
The accompanying notes are an integral part of these consolidated financial statements.
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Audited)
Accumulated
Additional
Other Total Non-
Common Shares Paid-in Retained Statutory Comprehensive Stockholders’ controlling Total
Shares Amount Capital Earnings Reserve Income (loss) Equity Interest Equity
Balance, June 30, 2019 65,539,737 $ 6,554 $ 521,987 37,208,897 38,679 (593,654 ) 37,182,463 -
37,182,463
Net income - -
-
3,550,610
3,550,610
3,550,610
Other comprehensive loss - Translation adjustment
- -
-
-
(1,065,087 ) (1,065,087 )
(1,065,087 )
Balance, June 30, 2020 65,539,737 $ 6,554 $ 521,987 40,759,507 38,679 (1,658,741 ) 39,667,986
39,667,986
Net income
1,291,122
1,291,122
1,291,122
Other comprehensive loss - Translation adjustment
3,815,533 3,815,533
3,815,533
Balance, June 30, 2021 65,539,737 $ 6,554 $ 521,987 42,050,629 38,679 2,156,792 44,774,641
44,774,641
The accompanying notes are an integral part of these consolidated financial statements.
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Audited)
For the Year Ended
June 30,
June 30,
Cash Flows from Operating Activities
Net income attributable to China Health Industries Holdings $ 1,291,122 $ 3,550,610
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expenses 878,794 805,308
Provision for doubtful accounts (13,666 ) (1,706 )
Deferred taxes gain 3,334 (3,651 )
Changes in operating assets and liabilities:
Inventory 118,743 25,965 )
Accounts receivable 2,667,083 (2,711,485 )
Other receivables 2,383 (4,640 )
Advance to suppliers and prepaid expenses 26,980 (214,955 )
Accounts payables and accrued expenses (36,554 ) (77,357 )
Advance from customers and other payables 12,368 (20,654 )
Amounts due to related parties 961,538 1,236,064
Wages payable (81,300 ) 17,835
Taxes payable (274,131 ) (196,356 )
Net cash provided by operating activities $ 5,556,694 $ 2,404,978
Cash Flows from Investing Activities
Withdraw of short term investment -
-
Purchase of property, plant and equipment (8,582 ) (24,709 )
Expenditure in construction in progress (5,073 ) (133,091 )
Disposal of property, plant and equipment - 5,831
Proceeds from short term investment -
-
Proceeds from disposal of subsidiary -
-
Net cash (used in)/provided by investing activities (13,655 ) (151,969 )
Cash Flows from Financing Activities
Proceed from related party debts -
-
Payment of short term loans -
-
Net cash (used in)/provided by financing activities -
-
Effect of exchange rates change on cash and cash equivalents 2,731,231 (1,688,070 )
Net increase/(decrease) in cash and cash equivalents 8,274,270 564,939
Cash and cash equivalents, beginning of period 36,072,474 35,507,535
Cash and cash equivalents, end of period $ 44,346,744 $ 36,072,474
Supplemental disclosure of cash flow information
Interest paid $ -
$ -
Taxes paid $ 973,420 $ 1,624,158
Non-cash activities:
Loan from related party for the construction of a facility $ 618,827 $ 727,787
The accompanying notes are an integral part of these consolidated financial statements.
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND BUSINESS BACKGROUND
China Health Industries Holdings, Inc. (“China Health US”) 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, it entered into a stock purchase agreement and Share Exchange (effecting a reverse merger) with Edmonds 6, Inc. (“Edmonds 6”), a Delaware corporation, and changed its name to Universal Fog, Inc. Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous operation since 1996) became a wholly-owned subsidiary of Edmonds 6.
China Health Industries Holdings Limited (“China Health HK”) was incorporated on July 20, 2007 in Hong Kong under the Companies Ordinance as a limited liability company. China Health HK 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 FASB ACS Topic 915 (“Development Stage Entities”).
Harbin Humankind Biology Technology Co., Limited (“Humankind”) was incorporated in Harbin City, Heilongjiang Province, the People’s Republic of China (the “PRC”) on December 14, 2003, as a limited liability company under the Company Law of the PRC. Humankind is engaged in the manufacturing and sale of health products.
On August 20, 2007, the sole shareholder of China Health HK entered into a share purchase agreement (the “Share Purchase Agreement”) with the owners of Humankind. Pursuant to the Share Purchase Agreement, China Health HK purchased 100% of the ownership in Humankind for a cash consideration of $60,408 (the “Share Purchase”). Subsequent to the completion of the Share Purchase, Humankind became a wholly-owned subsidiary of China Health HK. The Share Purchase was accounted for as a “reverse merger” since the owner of Humankind owned a majority of the outstanding shares of China Health HK’s common stock immediately following the execution of the Share Purchase Agreement, it was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that have been reflected in the financial statements for periods prior to the Share Purchase are those of Humankind and have been recorded at the historical cost basis. After completion of the Share Purchase, China Health HK’s consolidated financial statements include the assets and liabilities of both China Health HK and Humankind, the historical operations of Humankind, and the operations of China Health HK and its subsidiaries from the closing date of the Share Purchase.
On October 14, 2008, Humankind set up a 99% owned subsidiary, Harbin Huimeijia Medicine Company (“Huimeijia”), with its primary business being manufacturing and distributing medicine. Mr. Xin Sun, the Company’s majority owner, owns 1% of Huimeijia. Huimeijia is consolidated in the consolidated financial statements of China Health HK.
On December 31, 2008, China Health HK entered into a reverse merger with Universal Fog, Inc., a U.S. publicly traded shell company (the “Transaction”). China Health HK is the acquirer in the Transaction, and the Transaction has been treated as a recapitalization of China Health US. After the Transaction and a 20:1 reverse stock split, Mr. Xin Sun owned 61,203,088 shares of common stock, representing 98.3% of the 62,234,737 total outstanding shares of common stock of China Health US. On April 7, 2009, Mr. Sun transferred 28,200,000 shares of common stock to 296 individuals, leaving him with 33,003,088 shares of common stock of China Health US, or approximately 53.03% of the total outstanding shares of common stock. Universal Fog, Inc. changed its name to China Health Industries Holdings, Inc. on February 19, 2009.
On November 22, 2013, Humankind completed the acquisition of Heilongjiang Huimeijia Pharmaceutical Co., Ltd. (“HLJ Huimeijia”) for a total purchase price of $16,339,869 (RMB100,000,000). HLJ Huimeijia was founded on October 30, 2003, and is engaged in the manufacturing and distribution of tincture, ointments, rubber paste (including hormones), topical solution, suppositories, liniment (including traditional Chinese medicine extractions), enemas and oral liquids. HLJ Huimeijia’s predecessor is Heilongjiang Xue Du Pharmaceutical Co., Ltd., which has established its brand name in the market through its supply of high quality medical products. HLJ Huimeijia is categorized as a “high and new technology” enterprise by the Science Technology Department in Heilongjiang Province. HLJ Huimeijia has 21 products which have been approved by, and have received approval numbers issued by, the China State Food and Drug Administration (the “NMPA”). In addition, HLJ Huimeijia is the holder of one patent for utility models, five patents for external design and three trademarks in China, including the Chinese brand name of “Xue Du” which has an established reputation among customers in northeastern China.
On December 24, 2014, Humankind entered into a stock transfer agreement (the “Original Agreement”) with Xiuzheng Pharmaceutical Group Co., Ltd. a company incorporated under the laws of the PRC and located in Jilin province (“Xiuzheng Pharmacy” or the “Buyer”), Mr. Xin Sun, the CEO of the Company, and Huimeijia, 99% owned by Humankind and 1% owned by Mr. Xin Sun. Pursuant to the Original Agreement, Humankind and Mr. Xin Sun (the “Equity Holders”), would sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy.
On February 9, 2015, the four parties entered into a supplementary agreement (the “Supplementary Agreement”) to modify the terms of the Original Agreement, pursuant to which the Equity Holders and Huimeijia (collectively the “Asset Transferors”) would sell only the 19 drug approval numbers (including the tablet, capsule, powder, mixture, oral liquid, syrup and oral solution under the 19 approval numbers; licenses including the original copies of Business License, Organization Code Certificate, Tax Registration Certificate, Drug Production Permit and GMP Certificate, and other documents and original copies related to the production and operation of the 19 drugs) (the “Assets”) to Xiuzheng Pharmacy. The Equity Holders would have retained their equity interests in Huimeijia, but would have pledged such equity interests to Xiuzheng Pharmacy until the Assets were transferred, at which time the cash consideration would have been paid by the Buyer. Total cash consideration would have been the same as under the Original Agreement, i.e., RMB 8,000,000 (approximately $1,306,186) to the Asset Transferors. In the event that the Assets had failed to be transferred to the Buyer due to the fault of the Asset Transferors, the paid consideration would have been returned to the Buyer with interest accrued. If the failure of the transfer of the Assets were a result of changes in government policy or force majeure, the paid cash consideration would have been returned to the Buyer but without any interest.
On October 12, 2016, the four parties agreed to rescind the Supplementary Agreement and entered into a new supplementary agreement (the “New Supplementary Agreement”), pursuant to which the four parties agreed to execute the transfer of the equity interests based on the Original Agreement and the Equity Holders agreed to sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy. The transfer of 100% of the equity interests of Huimeijia to the Buyer was for total cash consideration of RMB 8,000,000 (approximately $1,306,186) (the “Purchase Price”) to the Equity Holders. 40% of the Purchase Price was due within 10 business days after the signing of the New Supplementary Agreement; 40% of the Purchase Price was due within 10 business days after the completion of the changes in business registration described in the Original Agreement and Xiuzheng Pharmacy obtaining documents evidencing its ownership on Huimeijia; 15% of the Purchase Price is due within 10 business days after the transfer of all of the Assets is approved by Heilongjiang FDA; and 5% of the Purchase Price is due within 10 business days after all of the Assets have been transferred to Xiuzheng Pharmacy or its designee and Humankind and Mr. Xin Sun have instructed Xiuzheng Pharmacy complete three-batches production of all forms of the drugs included in the Assets. As of the date of this report, 80% of the Purchase Price has been paid, the Company has completed changes in its business registration, and Xiuzheng Pharmacy has obtained a business license issued by the local State Administration of Industry and Commerce in Harbin (“Harbin SAIC”) to Huimeijia, in which the ownership of Huimeijia has been recorded as held by Xiuzheng Pharmacy, with Harbin SAIC and the legal representative (a person that is authorized to take most of the corporate actions on behalf of a company under the corporate laws in China) of Huimeijia has been appointed by the Buyer.
China Health US, China Health HK, Humankind and HLJ Huimeijia are collectively referred herein to as the “Company.”
As of June 30, 2021, the Company’s corporate structure was as follows:
Note 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States (“US GAAP”) and have been consistently applied in the preparation of the consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include China Health US and its four subsidiary companies, including China Health HK, Humankind and HLJ Huimeijia. All significant intercompany balances and transactions have been eliminated in consolidation and combination.
On November 22, 2013, China Health US, through its wholly owned subsidiary Humankind, completed the acquisition of HLJ Huimeijia. HLJ Huimeijia and Humankind are under the common control of Mr. Xin Sun, the CEO of the Company before and after the date of transfer. Humankind’s accounting policy adopted the guidance in ASC 805-50-05-5 for the transfer of net assets between entities under common control to apply a method similar to the pooling-of-interests’ method. Under this method, the financial statements of Humankind shall report results of operations for the period in which the transfer occurs as though the transfer of net assets had occurred at the beginning of the period. Results of operations for that period will thus comprise both those of the previously separate entities combined from the beginning of the period to the date the transfer is completed and those of the combined operations from that date to the end of the period. Similarly, Humankind shall present the statements of financial position and other financial information as of the beginning of the period as though the assets and liabilities had been transferred at that date. Financial statements and financial information of Humankind presented for prior years also shall be retrospectively adjusted to furnish comparative information.
Segment Reporting
FASB ASC Topic 280, “Segment Reporting,” established standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company has three reportable operating segments: Humankind, HLJ Huimeijia and Others. The segments are grouped based on the types of products provided.
Fair Value of Financial Instruments
The provisions of accounting guidance, FASB ASC Topic 820 that applies to the Company requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
Fair Value Measurements
FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.
Various inputs are considered when determining the fair value of the Company’s debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below.
Level 1 - observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.).
Level 3 - significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).
The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The Company had no financial assets or liabilities carried and measured on a recurring basis during the reporting periods.
The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.
Foreign Currency Translation and Transaction
Humankind, Huimeijia and HLJ Huimeijia maintain their books and accounting records in PRC currency “Renminbi” (“RMB”), which has been determined as the functional currency. The functional currency of China Health HK is the Hong Kong Dollar (“HKD”).
Transactions denominated in currencies other than the functional currencies are recorded at the exchange rates prevailing on the date of the transactions, as quoted by the Federal Reserve Board. Foreign currency exchange gains and losses resulting from these transactions are included in operations.
Humankind, Huimeijia, HLJ Huimeijia and China Health Hong Kong’s financial statements are translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the above entities are translated at the prevailing exchange rate at each reporting period end date. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from the translation of these financial statements are reflected as accumulated other comprehensive income in shareholders’ equity and non-controlling interests.
For the purpose of presenting these financial statements, the Company’s assets and liabilities with functional currency of HKD are expressed in USD at the exchange rate on the balance sheet date, which was 7.7658 and 7.7501 as of June 30, 2021 and June 30, 2020, respectively; stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rates during the year, which was 7.7563 and 7.7942 for the years ended June 30, 2021 and 2020, respectively. For Renminbi currency, the Company’s assets and liabilities are expressed in USD at the exchange rate on the balance sheet date, which was 6.4566 and 7.0650 as of June 30, 2021 and June 30, 2020, respectively; stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rates during the year, which was 6.6221 and 7.0309 for the years ended June 30, 2021 and 2020, respectively.
Statement of Cash Flows
In accordance with Statement FASB ASC Topic 230, “Statement of Cash Flows,” cash flow from the Company’s operations is calculated based upon the local currencies and translated to the reporting currency using an average foreign exchange rate for the reporting period. As a result, amounts related to assets and liabilities reported in the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Significant estimates and assumptions by management include, among others; useful lives of long-lived assets and intangible assets, valuation of inventory, accounts receivable and notes receivable, impairment analysis of long-lived assets, construction in progress, intangible assets and deferred taxes. While the Company believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits in banks with maturities of three months or less, and all highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less at the time of purchase.
As of June 30, 2021, and 2020, the Company’s uninsured bank balance was mainly maintained at financial institutions located in the PRC and Hong Kong, totaled $44,346,744 and $36,072,474, respectively. The Company has no insured bank balance as of June 30, 2021 and 2020, respectively.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on management’s assessment of known requirements, aging of receivables, payment and bad debt history, the customer’s current credit worthiness, changes in customer payment patterns and the economic environment. From November 1, 2013, the Company changed its credit policy by offering ninety (90) day payment terms for sales agents, whereas the payment terms for sales agents before November 1, 2013 were thirty (30) day. Due to COVID 19, the company extended its credit policy to 180 days this year. As of June 30, 2021 and 2020, the balances of accounts receivable were $2,346,867 and $4,631,861, respectively. The Company determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company evaluated the nature of all accounts receivable then provided allowance for doubtful accounts. As of June 30, 2021, and 2020, the balances of allowance for doubtful accounts were $60,394 and $68,003 respectively.
Advance to Suppliers
The Company periodically makes advances to certain vendors for purchases of raw materials, or service providers for services relating to construction plans for our plant, equipment and production lines for the GMP upgrading, and records these payments as advance to suppliers. The increase in the amount of advance to suppliers is due to fluctuation of exchange rate. As a result, as of June 30, 2021, and 2020, advance to suppliers amounted to $218,307 and $205,650, respectively.
Inventory
Inventory consists of raw materials, work in progress and finished goods of manufactured products.
Inventory is stated at lower of cost or market and consists of materials, labor and overhead. HLJ Huimeijia uses the weighted average method for inventory valuation. The other entities of the Company use the first-in, first-out (“FIFO”) method for inventory valuation. Overhead costs included in finished goods include direct labor cost and other costs directly applicable to the manufacturing process. The Company evaluates inventory for excess, slow moving, and obsolete inventory as well as inventory the value of which is in excess of its net realizable value. This evaluation includes analysis of sales levels by product and projections of future demand. If future demand or market conditions are less favorable than the Company’s projections, a write-down of inventory may be required, and would be reflected in cost of goods sold in the period the revision is made. The inventory allowance with an amount of $nil and $nil were provided for the years ended June 30, 2021, and 2020, respectively.
Impairment of Long-Lived Assets
The Company’s long-lived assets and other assets are reviewed for impairment in accordance with the guidance of the FASB ASC Topic 360-10, “Property, Plant, and Equipment,” and FASB ASC Topic 205, “Presentation of Financial Statements.” The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of the asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on the Company’s reporting results and financial position. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. As of June 30, 2021, and 2020, the Company has not experienced impairment losses on its long-lived assets. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Maintenance, repairs and minor renewals are expensed as incurred, major renewals and improvements that extend the lives or increase the capacity of plant assets are capitalized.
When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the results of operations in the reporting period of disposition.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The depreciable lives applied are:
Building, Warehouse and Improvements
20 to 30 years
Office Equipment
3 to 7 years
Vehicles
5 to15 years
Machinery and Equipment
7 to 15 years
Intangible Assets
The Company evaluates intangible assets in accordance with FASB ASC Topic 350, “Intangibles - Goodwill and Other.” Intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required. The value of the Company’s intangible assets could be impacted by future adverse changes such as: (i) any future declines in the Company’s operating results, (ii) a decline in the valuation of technology, including the valuation of the Company’s common stock, (iii) a significant slowdown in the worldwide economy, or (iv) any failure to meet the performance projections included in the Company’s forecasts of future operating results. In accordance with FASB ASC Topic 350, the Company tests intangible assets for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management estimates of asset useful lives and future cash flows. Significant judgment by management is required in the forecasts of future operating results that are used in the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If the Company’s actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period. Based on such evaluations, there were no impairments recorded for intangible assets for the years ended June 30, 2021, and 2020, respectively.
Construction in Progress
Construction in progress represents the costs incurred in connection with the construction of buildings or new additions to the Company’s plant facilities. Costs classified as construction in progress include all costs of obtaining the asset and bringing it to the location in the condition necessary for its intended use. No depreciation is provided for construction in progress until such time as the assets are completed and are placed into service.
The Company reviews the carrying value of construction in progress for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the assets. The factors considered by Management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, there were no impairments recorded for construction in progress, for the years ended June 30, 2021 and June 30, 2020, respectively. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future.
Revenue Recognition
The Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers based on any contract which has been identified. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers while performance obligation are identified and completed. For most of the Company’s products net sales, control transfers when products are shipped and transaction price are determined. The majority of the Company’s revenue relates to the sale of inventory to customers, and revenue is recognized when control of the products or services is transferred to its customers that reflects the performance obligations are properly allocated and satisfied with transaction price determined. Given the nature of the Company’s business and the applicable rules guiding revenue recognition, the Company’s revenue recognition practices do not contain estimates that materially affect the results of operations. The Company records revenue at the discounted selling price and allows its customers to return products for exchange or credit subject to certain limitations. A provision for such returns is recorded based upon historical experience. There has been no provision recorded for returns based upon historical experience for the years ended June 30, 2021 and 2020, respectively.
Cost of Goods Sold
Cost of goods sold consists primarily of the costs of raw materials, freight charges, direct labor, depreciation of plants and machinery, warehousing and overhead costs associated with the manufacturing process and commission expenses.
Income Taxes
The Company adopts FASB ASC Topic 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize the benefits or that future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.
As a result of the implementation of FIN 48 (ASC 740-10), the Company undertook a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by FIN 48 (ASC 740-10). The Company recognized no material adjustments to liabilities or stockholders’ equity as a result of the implementation. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.
The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability may be materially different from the Company’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or deferred tax asset valuation allowance.
Enterprise Income Tax
Under the Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the PRC (the “EIT Law”), income tax is payable by enterprises at a rate of 25% of their taxable income.
Value Added Tax
The Provisional Regulations of the PRC Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax (“VAT”) is imposed on goods sold in, or imported into, the PRC and on processing, repair and replacement services provided within the PRC.
VAT payable in the PRC is charged on an aggregated basis at a rate of 13% or 16% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 16% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of VAT included in the price or charges, and less any deductible VAT already paid by the taxpayer on purchases of goods and services in the same financial year. As of June 30, 2021 and June 30, 2020, VAT payables were $34,697 and $92,652, respectively.
Sales-Related Taxes
Pursuant to the tax law and regulations of the PRC, the Company is obligated to pay 7% and 5% of the annual aggregate VAT paid by the Company as taxes for the purposes of maintaining and building cities and educational facilities, which fees are included as sales-related taxes. Sales-related taxes are recorded when sales revenue is recognized.
Concentrations of Business and Credit Risks
All of the Company’s manufacturing is located in the PRC. There can be no assurance that the Company will be able to successfully continue to manufacture its products and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Moreover, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general economic conditions, prices of raw materials, competition, governmental and political conditions, and changes in regulations. Since the Company is dependent on trade in the PRC, the Company is subject to various additional political, economic and other uncertainties. Among other risks, the Company’s operations will be subject to the risks of restrictions on transfer of funds, domestic customs, changing taxation policies, foreign exchange restrictions, and political and governmental regulations. The Company operates in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between U.S. dollars and the Chinese currency RMB. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting periods.
Earnings Per Share
Basic earnings per common share is computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding during the period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. For the years ended June 30, 2021 and 2020, the Company had no potential dilutive common stock equivalents outstanding.
Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period.
FASB ASC Topic 260, “Earnings Per Share,” requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The main objective of the standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In issuing this standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. The standard is applicable to loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, loan commitments and certain other off-balance sheet credit exposures, debt securities (including those held-to-maturity) and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The CECL model does not apply to available-for-sale debt securities. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities. Accordingly, the new methodology will be utilized when assessing the Company’s financial instruments for impairment. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. ASU 2016-13 is effective for years beginning after December 15, 2019, including interim periods within those fiscal years under a modified retrospective approach. Early adoption is permitted for the periods beginning after December 15, 2018. The Company adopted the guidance from July 1, 2020..
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which modifies the disclosure requirements on fair value measurements, including removing the requirement to disclose (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels and (3) the valuation processes for Level 3 fair value measurements. ASU 2018-13 also added new disclosures including the requirement to disclose (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019 and early adoption is permitted. This standard will only impact the disclosures pertaining to fair value measurements. The Company adopted the guidance from July 1, 2020.
NOTE 3 - ASSETS SALE
On December 24, 2014, Humankind entered into a stock transfer agreement (the “Agreement”) with Xiuzheng Pharmaceutical Group Co., Ltd a company incorporated under the laws of the People’s Republic of China and located in Jilin province (“Xiuzheng Pharmacy” or the “Buyer”), Mr. Xin Sun, the CEO of the Company, and Huimeijia, pursuant to which, Humankind and Mr. Xin Sun (the “Equity Holders”), shall sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy. The transfer of the 100% equity interests of Huimeijia to the Buyer was for total cash consideration of RMB 8,000,000 (approximately $1,306,186) to the Equity Holders.
On February 9, 2015, the four parties entered into a supplementary agreement (the “Supplementary Agreement”) to modify the terms of the Agreement, pursuant to which, the Equity Holders and Huimeijia (collectively the “Assets Transferors”) shall only sell the 19 drug approval numbers (including the tablet, capsule, powder, mixture, oral liquid, syrup and oral solution under the 19 approval numbers; licenses including the original copies of Business License, Organization Code Certificate, Tax Registration Certificate, Drug Production Permit and GMP Certificate, and other documents and original copies related to the production and operation of the 19 drugs) (the “Assets”) to Xiuzheng Pharmacy. The Equity Holders will retain the equity interests in Huimeijia, but will have the equity interests pledged to Xiuzheng Pharmacy until the Assets are transferred, at which time all the cash consideration shall be paid by the Buyer. The total cash consideration remains to be the same as under the Agreement, i.e., RMB 8,000,000 (approximately $1,306,186) to the Assets Transferors. In the event that the Assets are failed to be transferred to the Buyer due to the fault of the Assets Transferors, the paid consideration shall be returned to the Buyer with interests accrued. If the failure of the transfer of the Assets is a result of the government policy changes or force majeure, the paid cash consideration shall be returned to the Buyer but without any interests.
As of June 30, 2016, the transfer of the Assets had not been completed because the assets transfer crossed different provinces which resulted in a complicated interaction among the local administrations of Heilongjiang Province, where Huimeijia is located and Jilin Province, where the transferee is located.
On October 12, 2016, the four parties agreed to rescind the Supplementary Agreement and entered into a new supplementary agreement (the “New Supplementary Agreement”), pursuant to which the four parties agreed to execute the transfer of the equity interests based on the Original Agreement and the Equity Holders agreed to sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy. The transfer of 100% of the equity interests of Huimeijia to the Buyer was for total cash consideration of RMB 8,000,000 (approximately $1,306,186) (the “Purchase Price”) to the Equity Holders. 40% of the Purchase Price was due within 10 business days after the signing of the New Supplementary Agreement; 40% of the Purchase Price was due within 10 business days after the completion of the changes in business registration described in the Original Agreement and Xiuzheng Pharmacy obtaining documents evidencing its ownership on Huimeijia; 15% of the Purchase Price is due within 10 business days after the transfer of all of the Assets is approved by Heilongjiang FDA; and 5% of the Purchase Price is due within 10 business days after all of the Assets have been transferred to Xiuzheng Pharmacy or its designee and Humankind and Mr. Xin Sun have instructed Xiuzheng Pharmacy to complete three-batches production of all forms of the drugs included in the Assets. As of the date of this report, 80% of the Purchase Price has been paid, the Company has completed changes in its business registration, and Xiuzheng Pharmacy has obtained a business license issued by the local State Administration of Industry and Commerce in Harbin (“Harbin SAIC”) to Huimeijia, in which the ownership of Huimeijia has been recorded as held by Xiuzheng Pharmacy, with Harbin SAIC and the legal representative (a person that is authorized to take most of the corporate actions on behalf of a company under the corporate laws in China) of Huimeijia has been appointed by the Buyer.
NOTE 4 - ACCOUNTS RECEIVABLE
The Company’s accounts receivable amounted to $2,346,867 and $4,631,861 net of allowance for doubtful accounts amounting to $60,394 and $68,003 as of June 30, 2021 and 2020, respectively.
NOTE 5 - INVENTORIES
Inventory consists of following:
June 30,
June 30,
Raw Materials $ 251,989 $ 278,189
Supplies and Packing Materials 93,452 104,992
Work-in-Progress 273,924 78,132
Finished Goods 142,274 346,038
Total $ 761,639 $ 807,351
The inventory allowance with an amount of $nil and $nil were provided for the years ended June 30, 2021 and 2020, respectively.
NOTE 6 - CONSTRUCTION IN PROGRESS
Construction in progress consisted of the following:
June 30,
June 30,
Plant - HLJ Huimeijia $ 560,910 $ 511,664
Factory Maintenance - HMK -
-
Total $ 560,910 $ 511,664
On April 6, 2012, HLJ Huimeijia entered into an agreement with a contractor for construction of the HLJ Huimeijia plant. The estimated total cost of construction was approximately $1.86 million (RMB 12,800,000). As of June 30, 2021, 75.8% of construction has been completed, $1,449,229 (RMB 9,702,644) has been recorded as costs of construction in progress and construction in progress at an amount of $892,712 (RMB 6,356,767) has been completed and converted into property, plant and equipment.
NOTE 7 - PROPERTY, PLANTS AND EQUIPMENT
Property, plants and equipment consisted of the following
June 30,
June 30,
Building, Warehouses and Improvements $ 4,094,105 $ 3,741,542
Machinery and Equipment 1,900,986 1,729,239
Office Equipment 81,291 74,291
Vehicles 225,955 206,497
Others 998,674 912,674
Less Accumulated Depreciation (3,671,106 ) (2,986,445 )
Total $ 3,629,905 $ 3,677,798
Depreciation expense was $393,168 and $347,923 for the years ended June 30, 2021 and 2020, respectively. Depreciation expense charged to operations was $124,073 and $143,555 for the years ended June 30, 2021 and 2020, respectively. Depreciation expense charged to cost of goods sold was $269,095 and $204,368 for the years ended June 30, 2021 and 2020, respectively.
NOTE 8 - INTANGIBLE ASSETS
The following is a summary of intangible assets:
June 30,
June 30,
Land Use Rights - Humankind $ 981,630 $ 897,096
Health Supplement Product Patents - Humankind 4,646,408 4,246,285
Pharmaceutical Patents - HLJ Huimeijia 404,883 370,017
Land Use Rights - HLJ Huimeijia 671,419 613,600
Less: Accumulated Amortization (4,740,824 ) (3,877,384 )
Intangible Assets, net, Held for Continuing Operations $ 1,963,516 $ 2,249,614
All land in the PRC belongs to the State. Enterprises and individuals can pay the State a fee to obtain the right to use a piece of land for commercial purposes or residential purposes for an initial period of 50 years or 70 years, respectively. The land use right can be sold, purchased, and exchanged in the market. The successor owner of the land use right will have the right to use the land for the time remaining on the initial period. The patent has amortized life of 10 years.
Amortization expense charged to operations was $485,625 and $457,513 for the years ended June 30, 2021 and 2020, respectively.
NOTE 9 - RELATED PARTY DEBTS
Related party debts, which represent temporary short-term loans from Mr. Xin Sun and Mr. Kai Sun consisted of the following:
June 30,
June 30,
Mr. Xin Sun $ 8,043,544 $ 7,226,764
Mr. Kai Sun 36,217 33,098
Related Party Debts, Held for Continuing Operations $ 8,079,761 $ 7,259,862
These loans are unsecured and non-interest bearing and have no fixed terms of repayment; therefore, they are deemed payable on demand. Mr. Kai Sun, a director of Humankind, is a PRC citizen and a family member of Mr. Xin Sun, the CEO of the Company.
NOTE 10 - INCOME TAXES
(a) Corporate income taxes
China Health US was incorporated in the State of Arizona on July 11, 1996. After the Company had acquired the business of China Health HK through the acquisition of all the share capital of China Health HK under a share exchange agreement dated December 31, 2008, it became a holding company and do not conduct any substantial operations or business of its own in the State of Delaware and in the U.S.
The Company also does not provide for U.S. taxes or foreign withholding taxes on undistributed earnings from its non-U.S. subsidiaries, either owned directly or indirectly, because it was elected to indefinitely reinvest such earnings outside the U.S to support non-U.S. liquidity needs to fund operations and growth of its foreign subsidiaries and acquisitions.
United States
China Health US had no taxable income for U.S. corporate income tax purposes for the years ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and 2020, China Health US had $ 1,569,209 and $1,381,747 in net operating loss carry forwards available to offset future taxable income, respectively. The federal corporate net operating loss carryover is expired in 20 taxable years following the taxable year of the loss. If not utilized, the federal net operating loss for the fiscal years 2021 and 2020 in an amount of $ 187,462 and $304,263, respectively, will begin to expire in the years 2041 and 2040, respectively. Management believes that it is more likely than not that the benefits from these accumulated net operating losses will not be realized in the future due to the Company’s operating history and the continued losses of its U.S. operation. Accordingly, the Company has provided a full valuation allowance on the deferred tax assets under its U.S. entity.
Hong Kong
China Health Industries Holdings Limited (“China Health HK”) was incorporated in Hong Kong on July 20, 2007 and is subject to Hong Kong profits taxation on its business activities conducted in Hong Kong and income sourced in Hong Kong. As of June 30, 2021, and 2020, China Health Hong Kong had $ 10,588 and $10,099 in net operating loss carry forwards available to offset future taxable income, respectively. Net operating losses of Hong Kong can generally be carried forward indefinitely. The Company believes that it is more likely than not that these accumulated net operating losses will not be utilized in the future. Therefore, the Company had provided full valuation allowance for the deferred tax assets arising from the losses in Hong Kong during the years ended June 30, 2021, and 2020, amounting $489 and $397, respectively. Accordingly, there is no net deferred tax assets under this entity.
People’s Republic of China
Under the EIT Law, the standard EIT rate is 25%. The PRC subsidiaries of the Company are subject to PRC income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they operate.
The provision for income taxes consisted of the following for the years ended June 30, 2021 and 2020:
As of June 30, 2021, and 2020, taxes payable consists of:
June 30,
June 30,
Income tax payable $ 28,895 $ 257,261
Value-added tax payable 34,697 92,652
Other taxes payable 112,767 75,193
Total $ 176,359 $ 425,106
A reconciliation between the Company’s actual provision for income taxes and the provision at the statutory rate is as follows:
June 30,
June 30,
Pre-tax book income $ 2,021,583 $ 5,016,970
Federal statutory rate 21 % 21 %
Income tax computed at U.S. federal statutory rate 424,532 1,053,564
Non-deductible staff welfare -
-
Foreign rate differential 392,435 211,264
Change in valuation allowance (86,506 ) 201,532
Total provision for income taxes $ 730,461 $ 1,466,360
The Company’s effective tax rate was 36.1% and 29.2% for the years ended June 30, 2021 and 2020, respectively.
The provision for income taxes on income consists of the following for the years ended June 30, 2021 and 2020:
Provision for income taxes consisted of:
For the Years Ended
June 30,
Current provision:
Domestic $ -
$ -
Foreign 727,588 1,469,931
Total current provision 727,588 1,469,931
Deferred provision:
Domestic -
-
Foreign 2,873 (3,571 )
Total deferred provision 2,873 (3,571 )
Total provision for income taxes $ 730,461 $ 1,466,360
Significant components of deferred tax assets were as follows:
June 30,
June 30,
Deferred tax assets
Net operating loss carry forward $ 1,018,253 $ 1,075,533
Allowance for doubtful accounts (15,100 ) 17,001
Valuation allowance (1,000,220 ) (1,086,728 )
Deferred tax assets, net $ 2,933 $ 5,806
(b) Uncertain tax positions
There were no unrecognized tax benefits as of June 30, 2021 and 2020, respectively. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its tax positions. There was no interests and penalties arising from its tax payments for the years ended June 30, 2021.
NOTE 11 - EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding during the period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants.
Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period.
FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations.
For the years ended June 30, 2021, and 2020, the Company does not have potential dilutive shares. The following table sets forth the computation of basic and diluted net income per share:
For the Years Ended
June 30, June 30,
Net income/(loss) $ 1,291,122 $ 3,550,610
Net income/(loss) per share:
Net income (loss) per share Basic & diluted $ 0.0197 $ 0.0542
Weighted average shares outstanding:
Basic & diluted 65,539,737 65,539,737
NOTE 12 - 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 the PRC is still owned by the Chinese government. For example, all land is state owned and leased to business entities or individuals through the government’s granting of Land Use Rights. The granting process is typically based on government policies at the time of granting and can be lengthy and complex. This process may adversely affect the Company’s future manufacturing expansions. The Chinese government also exercises significant control over the 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, 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.
The Company had no rental commitment as of June 30, 2021.
NOTE 13 - MAJOR SUPPLIERS AND CUSTOMERS
For the year ended June 30, 2021, the Company had three suppliers that in the aggregate accounted for approximately 78% of the Company’s purchases, with each supplier accounting for 40%, 22% and 16%, respectively. For the year ended June 30, 2020, the Company had three suppliers that in the aggregate accounted for approximately 75% of the Company’s purchases, with each supplier accounting for 28%, 27% and 21%, respectively.
For the year ended June 30, 2021, the Company had six customers that in the aggregate accounted for 91% of the Company’s total sales, with each customer accounting for 23%, 18%, 16%, 13%, 12%, and 9%, respectively. For the year ended June 30, 2020, the Company had six customers that in the aggregate accounted for 85% of the Company’s total sales, with each customer accounting for 21%, 17%, 15%, 12%, 11% and 9%, respectively.
NOTE 14 - SEGMENT REPORTING
The Company was organized into three main business segments based on the types of products being provided to customers: HLJ Huimeijia, Humankind and others. Each of the three operating segments referenced above has separate and distinct general ledgers. The chief operating decision maker (“CODM”) receives financial information, including revenue, gross margin, operating income, and net income produced from the various general ledger systems to make decisions about allocating resources and assessing performance; however, the principal measure of segment profitability or loss used by the CODM is net income or loss by segment.
The following tables present summary information by segment for the years ended June 30, 2021 and 2020, respectively:
For the Year Ended
June 30, 2021
For the Year Ended
June 30, 2020
HLJ
Consolidated HLJ
Consolidated
Huimeijia Humankind Others operations Huimeijia Humankind Others operations
Revenues $ 16,754 $ 6,475,966 $ -
$ 6,492,720 $ 40,009 $ 9,891,878 $ -
$ 9,931,887
Cost of revenues 96,316 2,754,413 -
2,850,729 46,897 2,610,147 -
2,657,044
Gross profit (loss) (79,562 ) 3,721,553 -
3,641,991 (6,888 ) 7,281,731 -
7,274,843
Interest income 137,468 137,485 125,598 125,627
Interest expense -
-
-
-
-
-
Depreciation and amortization 62,239 547,459 -
609,698 82,871 518,197 -
601,068
Income tax -
730,461 -
730,461 -
1,466,360 -
1,466,360
Net income (loss) (386,910 ) 1,865,983 (187,951 ) 1,291,122 (568,279 ) 4,423,549 (304,660 ) 3,550,610
Total capital expenditures 5,074 8,582 -
132,811 24,990 -
157,801
Total assets $ 3,453,342 $ 50,347,870 $ 86,925 $ 53,888,137 $ 3,315,693 $ 44,904,281 $ 16,004 $ 48,235,978
NOTE 15 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined that there are no additional items are required to disclose.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Based upon their evaluation as of the end of the periods covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective to satisfy the objectives, due to the material weakness in our internal control over financial reporting discussed below.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and our sole board member regarding the preparation and fair presentation of published financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2021. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 in Internal Control-Integrated Framework. Our management has implemented and tested our internal control over financial reporting based on these criteria and did not identify any significant deficiencies and material weaknesses as of June 30, 2021. However, based on the fact that we do not have any full-time accounting personnel who have U.S. GAAP experience, our management has considered this as a material weakness and determined that as of June 30, 2021, the internal control over financial reporting was not effective.
In an effort to remedy this material weakness in the future, we intend to do the following:
● Develop a comprehensive training and development plan, for our finance, accounting and internal audit personnel, including our Chief Financial Officer, Financial Manager, and others, in the principles and rules of U.S. GAAP, SEC reporting requirements and the application thereof.
● Design and implement a program to provide ongoing company-wide training regarding the Company’s internal controls, with particular emphasis on our finance and accounting staff.
● Implement an internal review process over financial reporting to review all recent accounting pronouncements and to verify that the accounting treatment identified in such report have been fully implemented and confirmed by our internal control department. In the future, we will continue to improve our ongoing review and supervision of our internal control over financial reporting.
● Hire an individual that possesses the requisite U.S. GAAP experience and education.
Despite the material weakness reported above, our management believes that our consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
This report does not include an attestation report of our registered accounting firm regarding internal control over financial reporting. The management’s report was not subject to attestation by our registered public accounting firm because we are a smaller reporting company.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting have come to management’s attention during our last fiscal year that have materially affected, or are likely to materially affect, our internal control over financial reporting.
Limitations on Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information regarding our sole board member and executive officer. Our sole director holds office until the election and qualification of his successor.
Name
Age
Position
Xin Sun
Chairman (sole director), Chief Executive Officer, Chief Financial Officer and Treasurer
Biography
Mr. Xin Sun, age 55, has been serving as our Chairman of Board of Directors, Chief Executive Officer and Chief Financial Officer since 2009. From 1988 to 1991, he was the Production Manager at Ha Yao Group Sanchine Medicine Joint-Stock Company Ltd. From 1991 to 1994, he was the District Director for the Northeast District of China for Pfizer Pharmaceuticals Limited. Thereafter, he spent one year as the Director of Marketing for Ha Yao Group Sanchine Medicine Joint-Stock Company Ltd. From 1996 to 2002, he was the Chief Executive Officer of a company he founded, Heilongjiang Bijie Chemical Industry Co., Ltd., which is no longer in existence. From 2003 to the present, he has been the President and Chief Executive Officer of Humankind. Mr. Sun is also President and General Manager of Huimeijia. Mr. Xin Sun attended Jia Mu Si Medical College with a major in Pharmacy from 1984 to 1988. He obtained his Masters of Business Administration from Renmin University of China in 2004. Mr. Sun attended the Doctor of Business Administration program in Business Institute of Pennsylvania since September 2018 and received a doctor’s degree in 2019.
As a result of his professional experience, Mr. Xin Sun is well known in the pharmaceutical field in Harbin, PRC. While he was studying at Renmin University, Mr. Xin Sun developed many contacts in the pharmaceutical field, many of which later became district agents and other employees in Humankind’s distribution system.
Our sole director, Mr. Xin Sun, does not hold any directorships in other reporting companies and does not qualify as an “independent director” under the Rules of NASDAQ, Marketplace Rule 4200(a)(15).
To our knowledge, during the last ten years, none of our directors and executive officers (including those of our subsidiaries) have:
(a) had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
(b) been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
(c) been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
(d) been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Director Qualifications
Directors are responsible for overseeing the Company’s business consistent with their fiduciary duty to the stockholders. This significant responsibility requires highly-skilled individuals with various qualities, attributes and professional experience. Our sole director believes that there are general requirements for service on the Board that are applicable to all directors and that there are other skills and experience that should be represented on the Board as a whole but not necessarily by each director. The existing board member considers the qualifications of director and director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.
Qualifications for All Directors
In its assessment of each potential candidate, including those recommended by the stockholders, the Board will consider the nominee’s judgment, integrity, experience, independence, understanding of the Company’s business or other related industries and such other factors it determines are pertinent in light of the current needs of the Board.
The Board also takes into account the ability of a director to devote the time and effort necessary to fulfill his or her responsibilities to the Company.
The Board requires that each director be a recognized person of high integrity with a proven record of success in his or her field. Each director must demonstrate innovative thinking, familiarity with and respect for corporate governance requirements and practices, an appreciation of multiple cultures and a commitment to sustainability and to dealing responsibly with social issues. In addition to the qualifications required of all directors, the Board conducts interviews of potential director candidates to assess intangible qualities including the individual’s ability to ask difficult questions and, simultaneously, to work collegially. The Board does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process.
Qualifications, Attributes, Skills and Experience to be Represented on the Board as a Whole
The Board has identified particular qualifications, attributes, skills and experiences that should be represented on the Board as a whole, in light of the Company’s current needs and its business priorities. The Board believes that it should include some directors with a high level of financial literacy and some directors who possess relevant business experiences as a chief executive officer, president or similar position at a company. Marketing is the core focus of our business and the Company seeks to develop and deploy innovative and effective marketing and technology. Therefore, the Board believes that marketing and technology experience should be represented on the Board.
Presently, Mr. Xin Sun is the sole director of the Company. Mr. Xin Sun possesses many of the skills and experiences needed for our business. He has experience in the pharmaceutical industry, having previously been the District Director for the Northeast District of China for Pfizer Pharmaceuticals Limited from 1991 to 1994. He has also been the Director of Marketing for Ha Yao Group Sanchine Medicine Joint-Stock Company Ltd., where he acquired strong marketing experience. From 1996 to 2002, Mr. Xin Sun was the chief executive officer of a company he founded, Heilongjiang Bijie Chemical Industry Co., Ltd., and from 2003 to the present, he has been the president and chief executive officer of Humankind.
The Board plans to eventually increase its membership to include directors with skills and experiences complementary to Mr. Xin Sun’s background.
Board Leadership Structure and Role in Risk Oversight
Mr. Xin Sun is the Company’s Chairman and Chief Executive Officer. The Board’s role in the risk oversight of the Company includes, among other things:
- appointing, retaining and overseeing the work of the independent auditors, including resolving disagreements between the management and the independent auditors relating to financial reporting;
- approving all auditing and non-auditing services permitted to be performed by the independent auditors;
- reviewing annually the independence and quality control procedures of the independent auditors;
- reviewing and approving all proposed related party transactions;
- discussing the annual audited financial statements with the management; and
- meeting separately with the independent auditors to discuss critical accounting policies, management letters, recommendations on internal controls, the auditor’s engagement letter and independence letter and other material written communications between the independent auditors and the management.
Compliance with Section 16(a) of Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than ten percent of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Form 3, 4 and 5 respectively. Executive officers, directors and greater than ten percent shareholders are required by the SEC regulations to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on our review of the copies of such reports, we believe that, with respect to the fiscal year ended June 30, 2021, there is no triggering event for the filing of any report under Section 16(a) by our sole officer and director, or by any of the persons known to us to own more than ten percent of our common stock.
Meetings of Our Board of Directors
The Board held no meetings; however, the Board had resolved matters in written consent one time during the fiscal year ended June 30, 2021.
Board Committees
Audit Committee. We intend to establish an audit committee of the Board which will consist of soon-to-be-nominated independent directors. The audit committee’s duties will be to recommend to the Board the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The audit committee will at all times be composed exclusively of directors who are, in the opinion of the Board, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
Audit Committee Financial Expert. The Board currently acts as our audit committee. Since we are still a developing company, the Board is still in the process of finding an “audit committee financial expert” as defined in Regulation S-K and directors that are “independent” as that term is used in Section 10A of the Exchange Act.
Compensation Committee. We intend to establish a compensation committee of the Board. The compensation committee will review and approve our salary and benefits policies, including compensation of executive officers.
Code of Ethics
We currently do not have a Code of Ethics because we presently only have one director and one officer. We plan to adopt a Code of Ethics when the size of the Board and management increases.
Director Compensation
We did not compensate our director for the fiscal year ended June 30, 2021. Going forward, however, we intend to implement a market-based director compensation program.
Limitations on Liability
Under Delaware law, a corporation may indemnify its officers, directors, employees and agents under certain circumstances, including indemnification of such persons against liability under the Securities Act. Those circumstances include that an officer, director, employee or agent may be indemnified if the person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
Article Seventh of our Articles of Incorporation provides that no director shall be personally liable to the Company or the stockholders for monetary damages for any breach of fiduciary duty by such person in his or her capacity as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of his or her duty of loyalty to the Company or the stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation law, or (iv) for any transaction from which he or she derived an improper personal benefit. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Company for or with respect to any acts or omissions of such director occurring prior to such amendment.
We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his or her actions, whether or not the Delaware General Corporation Law would permit indemnification.
Indemnification against Public Policy
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling an issuer pursuant to the foregoing provisions, the opinion of the SEC is that such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The effect of indemnification may be to limit the rights of the Company and the stockholders (through stockholders’ derivative suits on behalf of the Company) to recover monetary damages and expenses against a director for breach of fiduciary duty.
Directors and Officers of Humankind
The following table sets forth certain information as of June 30, 2021 concerning the directors and executive officers of Humankind:
Directors and Executive Officers
Position/Title
Age
Xin Sun
Chairman, Chief Financial Officer, Treasurer
Baosen Ma
President, Secretary, Director
Kai Sun
Director
The following is a summary of the biographical information of those directors and officers of Humankind whose biographical information does not appear above:
Xin Sun, Chairman, Chief Financial Officer, Treasurer
Mr. Sun’s biography is discussed above under Item 10. Directors, Executive Officers and Corporate Governance and incorporated herein by reference.
Baosen Ma, President, Secretary and Director
Mr. Baosen Ma graduated from China University of Political Science and Law with a major in Financial Accounting. From 1987 to 1992, he was an accountant with Harbin Keluola Solar Power Co., Ltd. Thereafter, from 1992 to 1996, he was Vice General Manager and Sales Manager for Shanghai Dahua Solar Battery Co., Ltd. From 1996 to 2004, he was the East China Manager for the Ha Yao Group Sanchine Medicine Joint-Stock Ltd. In January 2004, Mr. Ma was appointed President, Secretary and Director of Humankind.
Kai Sun, Director
Mr. Kai Sun graduated from Mu Dan Jiang University with a major in Economics. From 1993 to 1995, he was Vice Director of Mu Dan Jiang Engine Factory. Thereafter, from 1995 to 1998, he was a Director at Mu Dan Jiang Engine Factory. From 1998 to 2004, he was an Administration Director for Mu Dan Jiang Lysine Co., Ltd. Since 2004, he has been the Administration Director at Humankind. Mr. Kai Sun is the younger brother of Mr. Xin Sun, the Company’s Chairman, Chief Financial Officer, Treasurer and sole director. In January 2004, Mr. Kai Sun was appointed a director of Humankind.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The following Summary Compensation Table sets forth, for the years indicated, all cash compensation paid, distributed or accrued for services, including salary and bonus amounts, rendered in all capacities by our Chief Executive Officer and all other executive officers who received or are entitled to receive remuneration in excess of $100,000 during the stated periods. Mr. Xin Sun, our Chief Executive Officer and sole director, receives no additional compensation for the services he provides in his capacity as director.
SUMMARY COMPENSATION TABLE
(all figures in US Dollars)
Non-Equity Non-qualified
Incentive Deferred All
Stock Option Plan Compensation Other
Salary Bonus Awards Awards Compensation Earnings Compensation Total
Name and Principal Position Year ($) ($) ($) ($) ($) ($) ($) ($)
Xin Sun, Chief Executive Officer, 31,327 - - N/A N/A N/A N/A 31,327
Chief Financial Officer 44,584 - - N/A N/A N/A N/A 44,584
Employment Agreements
We have no employment agreement with our sole principal executive officer, Mr. Xin Sun.
Equity Compensation Plan Information
The following table sets forth information regarding grants of awards to Named Executive Officer during the year ended June 30, 2021
Grants of Plan-Based Awards
Grant Estimated future payouts
under non-equity incentive
plan awards Estimated future payouts
under equity incentive plan
awards All other stock awards: Number of shares of stock or All other option awards: Number of securities underlying Exercise or base price of option awards Grant date fair value of stock and option
Name date Threshold($) Target($) Maximum($) Threshold(#) Target(#) Maximum(#) units(#) options(#) ($/Sh) awards
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l)
Xin Sun, Chief Executive Officer, Chief Financial Officer - - - - - - - - - - $ -
Outstanding Equity Awards at Fiscal Year-End
Option awards Stock awards
Name Number of securities underlying unexercised options(#) exercisable Number of securities underlying unexercised options(#) unexercisable Equity incentive plan awards: number of securities underlying unexercised unearned options(#) Option exercise price($) Option expiration date Number of shares or units of stock that have not vested(#) Market value of shares or units of stock that have not vested(#) Equity incentive plan awards: number of unearned shares, units or other rights that have not vested(#) Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested($)
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Xin Sun, Chief Executive Officer, Chief Financial Officer - - - - - - - - -
Option Exercises and Stock Vested
Option awards
Stock awards
Name
Number of shares acquired on exercise (#)
Value realized on exercise ($)
Number of shares acquired on vesting (#)
Value realized on vesting ($)
(a)
(b)
(c)
(d)
(e)
Xin Sun, Chief Executive Officer, Chief Financial Officer
-
-
-
-
Director’s and Officer’s Liability Insurance
We currently do not have insurance insuring directors and officers against liability; however, we are in the process of investigating the availability of such insurance.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information with respect to the beneficial ownership of our voting securities by (i) any person or group owning more than five percent of any class of voting securities, (ii) our director, (iii) our chief executive officer and president and (iv) all executive officers and directors as a group as of September 3, 2021.
The address of the beneficial owner listed below is Harbin Humankind Biology Technology Co. Limited, 3199-1 Longxiang Road, Songbei District, Harbin, Heilongjiang Province, PRC.
Amount and Nature of
Title of Class Name Beneficial Owner Percent of Class (1)
Common Stock Xin Sun, Chairman, Chief Executive Officer,
Chief Financial Officer and Treasurer 20,507,188 31.3 %
Common Stock All officers and directors as a group (1 person) 20,507,188 31.3 %
(1) Based on 65,539,737 total issued and outstanding shares of the Company as of September 3, 2021. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of September 3, 2021 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.
Mr. Xin Sun has the sole power to vote and dispose of all shares of common stock listed opposite his name. Mr. Sun did not and does not own any options or convertible securities.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The Company received temporary short-term loans from its majority owner and our sole director and principal executive officer, Mr. Xin Sun, a PRC citizen. These loans are unsecured and non-interest bearing, and have no fixed terms of repayment; therefore, they are deemed payable on demand. Cash flows classified as due to majority owner are classified as cash flows from financing activities.
The amounts due to related parties are used to support the normal business operation of the Company, the related cash flows are classified as operating activities. The total amounts due to Mr. Sun were $8,043,544 and $7,226,764as of June 30, 2021 and June 30, 2020, respectively.
There were no interested imputed on the loans for the fiscal years 2021 and 2020, respectively.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
We were billed by CENTURION ZD CPA & CO., our independent public accountants for the following professional services it performed for us during the fiscal year ended June 30, 2021 and 2020, as set forth in the table below:
Audit-
Audit Related Tax Other
Fees Fees Fees Fees
$ 140,000 - - -
$ 140,000 - - -
Audit Fees -This category includes the audit of our annual financial statements and services that are normally provided by the independent auditors in connection with engagements for those fiscal years.
Audit-Related Fees - This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees”.
Tax Fees - This category consists of professional services rendered by the Company’s independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
Pre-Approval Policies and Procedures
All of the services rendered to us by our independent registered public accountants were pre-approved by the Board.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
Exhibit
Filed
Index
Description of Document
Herewith
Incorporated by Reference To:
3.1
Articles of Incorporation.
Exhibit 3.1 of the Company’s Registration Statement on Form 10-SB filed with the SEC on December 1, 2004.
3.2
By-laws.
Exhibits 3.2 of the Company’s Registration Statement on Form 10-SB filed with the SEC on December 1, 2004.
3.3
Certificate of Amendment, dated May 11, 2005.
Exhibits 3.3 of the Company’s Annual Report on Form 10-K/A filed with the SEC on November 16, 2010.
3.4
Certificate of Amendment, dated November 12, 2008.
Exhibit 3.4 of the Company’s Annual Report on Form 10-K/A filed with the SEC on November 16, 2010.
3.5
Certificate of Amendment, dated February 11, 2009.
Exhibit 3.5 of the Company’s Annual Report on Form 10-K/A filed with the SEC on November 16, 2010.
4.1
Specimen of Common Stock Certificate
Exhibit 4.1 of the Company’s Annual Report on Form 10-K filed with the SEC on September 29, 2014.
10.1
English Translation of Land Use Agreement, dated June 7, 2004, between Harbin Humankind Biology Technology Co. Limited and Harbin City, Daochu District, Songbei Township, Jinxin Village.
Exhibit 10.3 of the Company’s Annual Report on Form 10-K/A filed with the SEC on November 16, 2010.
10.2
English Translation of Cooperative Agreement, dated September 17, 2008, between Harbin Humankind Biology Technology Co. Limited and the Commercial Bureau of Qing’an County.
Exhibit 10.5 of the Company’s Annual Report on Form 10-K/A filed with the SEC on November 16, 2010.
10.3
English Translation of Land Purchase Agreement, dated July 7, 2009, between Harbin Humankind Biology Technology Co. Limited and Harbin Songbei District Construction and Development Management Committee.
Exhibit 10.6 of the Company’s Annual Report on Form 10-K/A filed with the SEC on November 16, 2010.
10.4
English Translation of Technology Transfer Agreement, dated October 12, 2007, between Harbin Humankind Biology Technology Co. Limited and Beijing Jindelikang Bio- Technology Co., Ltd.
Exhibit 10.7 of the Company’s Annual Report on Form 10-K/A filed with the SEC on November 16, 2010.
10.5
English Translation of Health Food Technology Transfer Agreement, dated January 18, 2013 by and between Harbin Humankind Biology Technology Co., Limited and Guangzhou Aoda Biology Beauty Healthy Technology Co., Ltd.
Exhibit 10.22 of the Company’s Annual Report on Form 10-K filed with the SEC on October 15, 2013.
10.6
English Translation of Stock Transfer Agreement, dated April 10, 2013, by and between Stockholder of Heilongjiang Huimeijia Pharmaceuticals Co., Ltd, Liyuan Sun and Harbin Humankind Biology Technology Co., Limited. and its addendum dated June 18, 2013.
Exhibit 10.23 of the Company’s Annual Report on Form 10-K filed with the SEC on October 15, 2013.
10.7
English Translation of Stock Transfer Agreement, dated April 10, 2013, by and between Stockholder of Heilongjiang Huimeijia Pharmaceuticals Co., Ltd, Wenbin Zhang and Harbin Humankind Biology Technology Co., Limited. and its addendum dated June 18, 2013.
Exhibit 10.24 of the Company’s Annual Report on Form 10-K filed with the SEC on October 15, 2013.
10.8
English Translation of Stock Transfer Agreement dated December 24, 2014, by and among Harbin Humankind Biology Technology Co., Limited., Xin Sun, Harbin Huimeijia Medicine Company, and Xiuzheng Pharmaceutical Group Co., Ltd.
Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 31, 2014.
10.9
English Translation of the Supplementary Agreement dated February 9, 2015, by and among Harbin Humankind Biology Technology Co., Limited., Xin Sun, Harbin Huimeijia Medicine Company, and Xiuzheng Pharmaceutical Group Co., Ltd.
Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 13, 2015.
10.10
China Health Industries Holdings, Inc. 2015 Equity Incentive Plan, effective as of March 27, 2015
Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 2, 2015.
10.11
Form of the Restricted Stock Award Agreement
Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on April 2, 2015.
21.1
List of Subsidiaries.
Exhibit 21.1 of the Company’s Annual Report on Form 10-K filed with the SEC on September 28, 2018.
23.1
Consent of the Independent Publicly Registered Accountants
x
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
x
31.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
x
32.1
Certification pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
x
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).