UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ____________ to ____________

Commission File Number: 000-51060

CHINA HEALTH INDUSTRIES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware	86-0827216
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

3199-1 Longxiang Road, Songbei District Harbin City, Heilongjiang Province People’s Republic of China	150028
(Address of principal executive offices)	(Zip Code)

86-451-88100688
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Not Applicable	Not Applicable	Not Applicable

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒

As of February 10, 2021, there were 65,539,737 shares of common stock, $0.0001 par value per share, issued and outstanding. 

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets As of December 31, 2020 and June 30, 2020(Unaudited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Income For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows For the Six Months Ended December 31, 2020 and 2019 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements As of December 31, 2020 (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II	OTHER INFORMATION	31
Item 6.	Exhibits	31
Signatures		32
Exhibits/Certifications		33

i

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31, 2020		June 30, 2020
ASSETS
Current assets
Cash and cash equivalents	$	40,666,095	$	36,072,474
Accounts receivable, net		5,562,202		4,631,861
Inventory		982,064		807,351
Other receivables, net		34,439		32,255
Advances to suppliers		220,449		205,650
Prepayments		11,235		41,505
Total current assets	$	47,476,484	$	41,791,096
Property, plants and equipment, net		3,773,138		3,677,798
Intangible assets, net		2,189,361		2,249,614
Construction in progress		553,498		511,664
Prepayments – Non-Current		-		-
Deferred tax assets		6,286		5,806
Total assets	$	53,998,767	$	48,235,978
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	396,998	$	406,228
Other payables		75,922		63,271
Advances from customers		148,926		137,543
Related party debts		7,899,586		7,259,862
Wages payable		393,649		275,982
Taxes payable		582,784		425,106
Total current liabilities	$	9,497,865	$	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 December 31, 2020 and June 30, 2020, respectively)		6,554		6,554
Additional paid-in capital		521,987		521,987
Accumulated other comprehensive income		1,718,440		(1,658,741	)
Statutory reserves		38,679		38,679
Retained earnings		42,215,242		40,759,507
Total stockholders’ equity	$	44,500,902	$	39,667,986
Total liabilities and equity	$	53,998,767	$	48,235,978

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

	For the three Months Ended						For the Six Months Ended
	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019
REVENUE	$	3,089,716		$	3,421,988		$	5,281,798		$	5,475,912
COST OF GOODS SOLD		(1,294,333	)		(686,510	)		(2,246,113	)		(1,195,406	)
GROSS PROFIT		1,795,383			2,735,478			3,035,685			4,280,506
OPERATING EXPENSES
Selling, general and administrative expenses		516,959			633,303			717,291			1,000,291
Depreciation and amortization expenses		152,268			150,752			310,140			289,916
Total operating expenses		(669,227	)		(784,055	)		(1,027,431	)		(1,290,207	)
INCOME (LOSS) FROM OPERATIONS		1,126,156			1,951,423			2,008,254			2,990,299
OTHER INCOME/(EXPENSES)
Interest income		34,300			31,293			66,403			62,041
Interest expense					-			-			(1	)
Other income/(expenses), net		562			1			504			(416	)
Bank charges		(233	)		(237	)		(491	)		(362	)
Total other income, net		34,629			31,057			66,416			61,262
INCOME/(LOSS) BEFORE INCOME TAXES		1,160,785			1,982,480			2,074,670			3,051,561
Provision for income taxes		(344,742	)		(555,896	)		(618,935	)		(868,403	)
NET INCOME (LOSS)		816,043			1,426,584			1,455,735			2,183,158
Foreign currency translation gain (loss)		1,737,361			1,000,316			3,377,181			(492,989	)
COMPREHENSIVE INCOME		2,553,404			2,426,900			4,832,916			1,690,169
Basic & diluted earnings per share	$	0.0125		$	0.0218		$	0.0222		$	0.0333
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding		65,539,737			65,539,737			65,539,737			65,539,737

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED DECEMBER 31, 2020 AND 2019
(Unaudited)

	Common Shares				Additional Paid-in		Retained		Statutory		Accumulated Other Comprehensive Income			Total Stockholders’			Non-controlling		Total
	Shares		Amount		Capital		Earnings		Reserve		(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		-		-		-		2,183,158		-		-			2,183,158			-		2,183,158
Other comprehensive loss - Translation adjustment		-		-		-		-		-		(492,989	)		(492,989	)		-		(492,989	)
Balance, December 31, 2019		65,539,737	$	6,554	$	521,987	$	39,392,055	$	38,679	$	(1,086,643	)	$	38,872,632		$	-	$	38,872,632
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		-		-		-		1,455,735		-		-			1,455,735			-		1,455,735
Other comprehensive loss - Translation adjustment		-		-		-		-		-		3,377,181			3,377,181			-		3,377,181
Balance, December 31, 2020		65,539,737	$	6,554	$	521,987	$	42,215,242	$	38,679	$	1,718,440		$	44,500,902		$	-	$	44,500,902

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 AND 2019
(Unaudited)

	Common Shares				Additional Paid-in		Retained		Statutory		Accumulated Other Comprehensive Income			Total Stockholders’		Non-controlling		Total
	Shares		Amount		Capital		Earnings		Reserve		(loss)			Equity		Interest		Equity
Balance, September 30, 2019		65,539,737	$	6,554	$	521,987	$	37,965,471	$	38,679	$	(2,086,959	)	$	36,445,732		-		36,445,732
Net income		-		-		-		1,426,584		-		-			1,426,584		-		1,426,584
Other comprehensive loss - Translation adjustment		-		-		-		-		-		1,000,316			1,000,316		-		1,000,316
Balance, December 31, 2019		65,539,737	$	6,554	$	521,987	$	39,392,055	$	38,679	$	(1,086,643	)	$	38,872,632	$	-	$	38,872,632
Balance, September 30, 2020		65,539,737	$	6,554	$	521,987	$	41,399,199	$	38,679	$	(18,921	)	$	41,947,498	$	-	$	41,947,498
Net income		-		-		-		816,043		-		-			816,043		-		816,043
Other comprehensive loss - Translation adjustment		-		-		-		-		-		1,737,361			1,737,361		-		1,737,361
Balance, December 31, 2020		65,539,737	$	6,554	$	521,987	$	42,215,242	$	38,679	$	1,718,440		$	44,500,902	$	-	$	44,500,902

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended
	December 31,			December 31,
	2020			2019
Cash Flows from Operating Activities
Net income	$	1,455,735		$	2,183,158
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expenses		447,096			389,647
Provisions for doubtful accounts		2,693			(35,925	)
Deferred taxes loss/(gain)					(1	)
Changes in operating assets and liabilities,
Accounts receivable		(529,591	)		(1,253,232	)
Other receivables		467			(58	)
Inventory		(103,931	)		2,447
Advances to suppliers and prepaid expenses		34,603			(186,707	)
Accounts payables and accrued expenses		(41,111	)		(24,592	)
Advances from customers and other payables		7,275			(20,534	)
Amounts due to related parties		860,632			332,431
Wages payable		91,340			91,193
Taxes payable		122,276			250,639
Net cash provided by operating activities		2,347,484			1,728,466
Cash Flows from Investing Activities
Purchases of property, plants and equipment		(8,389	)		(24,713	)
Expenditures in construction in progress		(2,977	)		(130,964	)
Disposal of property, plant and equipment		-			5,832
Net cash (used in)/provided by investing activities		(11,366	)		(149,845	)
Cash Flows from Financing Activities
Proceeds from related party debts		-			-
Net cash (used in)/provided by financing activities		-			-
Effect of exchange rate changes on cash and cash equivalents		2,257,503			(410,325	)
Net increase/(decrease) in cash and cash equivalents		4,593,621			1,168,296
Cash and cash equivalents, beginning balance		36,072,474			35,507,535
Cash and cash equivalents, closing balance		40,666,095			36,675,831
Supplemental cash flow information
Cash paid for income taxes	$	568,598		$	654,004
Cash paid for interest expenses	$	-		$	-
Non-cash activities:
Loan from related party for the construction of a facility	$	-		$	701,623

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED 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, National Medical Products Administration, or NPMA (formerly known as the China State Food and Drug Administration, or the CFDA). 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.

6

On February 9, 2015, the four parties to the Original Agreement 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 same 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 December 31, 2020, the Company’s corporate structure was as follows:

 

7

Note 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

This summary of the Company’s significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management (“Management”), which is responsible for the integrity and objectivity of the financial statements and notes. 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 unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted as allowed by such rules and regulations, and Management believes that the disclosures are sufficient so that the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020. These unaudited condensed consolidated financial statements include all adjustments which, in the opinion of Management, are necessary for a fair presentation of the financial position and the results of operations of the Company. All such adjustments are of a normal and recurring nature. The results of operations of the Company for the six months ended December 31, 2020 may not be indicative of results that may be expected for the year ended June 30, 2021.

8

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include China Health US and its three subsidiary companies, namely 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 were and are under the common control of Mr. Xin Sun, the CEO of China Health US, 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 an accounting 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 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 shall also 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.

9

The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or a 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 discretion of Management. For other financial instruments, pricing inputs are less observable in the market and may require judgment of Management.

Translation of Foreign Currencies

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.

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.

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 be the same as the corresponding balances on the balance sheets.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with US 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. Management 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 life 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 Management 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.

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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 December 31, 2020 and June 30, 2020, the Company’s uninsured bank balances were mainly maintained at financial institutions located in the PRC and Hong Kong. The uninsured bank balances were $40,666,095 and $36,072,474 as of December 31, 2020 and June 30, 2020, respectively. The Company had no insured bank balances as of December 31, 2020 and June 30, 2020.

Accounts Receivable

Accounts receivable is 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. As of December 31, 2020 and June 30, 2020, the balances of accounts receivable were $5,562,202 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. The Company has determined that an allowance of $76,426 and $68,003 was appropriate as of December 31, 2020 and June 30, 2020, respectively.

Advances to Suppliers

The Company periodically makes advances to certain vendors for purchases of raw materials or to service providers for services relating to construction plans for its plants, equipment and production lines for GMP upgrading, and records these payments as advances to suppliers. As of December 31, 2020 and June 30, 2020, advances to suppliers amounted to $220,449 and $205,650, respectively.

Inventory

Inventory consists of raw materials, work in progress, and finished goods or manufactured products.

Inventory is stated at the lower of either cost or market value and consists of materials, labor and overhead. HLJ Huimeijia uses the weighted average method for inventory valuation. The other subsidiaries of the Company use the first-in, first-out (“FIFO”) method for inventory valuation. Overhead costs included in finished goods include direct labor costs 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 in the amounts of $nil and $nil were provided for as of December 31, 2020 and June 30, 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 life and future cash flows. Actual useful life 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 December 31, 2020 and June 30, 2020, the Company had 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.

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Property, Plants and Equipment

Property, plants and equipment are carried at the lower of either cost or fair value. Maintenance, repairs and minor renewals are expensed as incurred, and major renewals and improvements that extend the life or increases 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 life applied are:

Buildings, Warehouses 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 life 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’s estimates of asset useful life and future cash flows. Significant judgment of 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, the Company could incur additional impairment charges in a future period. Based on such evaluations, there was no impairment recorded for intangible assets, for the six months ended December 31, 2020 and 2019.

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 and 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 was no impairments recorded for construction in progress, for the six months ended December 31, 2020 and 2019.

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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. 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 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. 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 six months ended December 31, 2020 and 2019, 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.

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Enterprise Income Tax

Under the Provisional Regulations of the 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 the 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 December 31, 2020 and June 30, 2020, VAT payables were $122,026 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. Sales-related taxes were $55,070 and $74,108 for the six months ended December 31, 2020 and 2019, respectively.

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.

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Earnings Per Share

Basic earnings per common share are 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 six months ended December 31, 2020 and 2019, 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. The Company finalized its analysis and the adoption of this guidance has no material impact on the Company’s consolidated financial statements and its internal controls over financial reporting.

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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. The Company finalized its analysis and the adoption of this guidance has no material impact on the Company’s consolidated financial statements and its internal controls over financial reporting.

NOTE 3 - ACCOUNTS RECEIVABLE

The Company’s accounts receivable was $5,562,202 and $4,631,861, net of allowances for doubtful accounts amounting to $76,426 and $68,003, as of December 31, 2020 and June 30, 2020, respectively.

NOTE 4 - INVENTORY

Inventory consisted of following:

	December 31,		June 30,
	2020		2020
Raw Materials	$	310,808	$	278,189
Supplies and Packing Materials		123,887		104,992
Work-in-Progress		176,969		78,132
Finished Goods		370,400		346,038
Total	$	982,064	$	807,351

The inventory allowance in the amounts of $nil and $nil was provided for as of December 31, 2020 and June 30, 2020, respectively.

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NOTE 5 - CONSTRUCTION IN PROGRESS

Construction in progress from the continuing operations of the Company consisted of the following:

	December 31,		June 30,
	2020		2020
Plant - HLJ Huimeijia	$	553,498	$	511,664
Factory Maintenance - Humankind		-		-
Total	$	553,498	$	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 December 31, 2020, 78% of construction has been completed, $1,446,210 (RMB 9,682,478) 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 6 - PROPERTY, PLANTS AND EQUIPMENT

Property, plants and equipment consisted of the following:

	December 31,			June 30,
	2020			2020
Building, Warehouses and Improvements	$	4,051,187		$	3,741,542
Machinery and Equipment		1,881,058			1,729,239
Office Equipment		80,439			74,291
Vehicles		223,587			206,497
Others		988,205			912,674
Less: Accumulated Depreciation		(3,451,338	)		(2,986,445	)
Total	$	3,773,138		$	3,677,798

Depreciation expenses was $209,731 and $160,788 for the six months ended December 31, 2020 and 2019, respectively. Depreciation expenses charged to operations was $72,775 and $61,057 for the six months ended December 31, 2020 and 2019, respectively. Depreciation expenses charged to cost of goods sold was $136,956 and $99,731 for the six months ended December 31, 2020 and 2019, respectively.

NOTE 7 - INTANGIBLE ASSETS

The following is a summary of intangible assets from the continuing operations of the Company:

	December 31, 2020			June 30, 2020
Land Use Rights – Humankind	$	971,339		$	897,096
Health Supplement Product Patents – Humankind		4,597,701			4,246,285
Pharmaceutical Patents - HLJ Huimeijia		400,639			370,017
Land Use Rights - HLJ Huimeijia		664,381			613,600
Less: Accumulated Amortization		(4,444,699	)		(3,877,384	)
Total	$	2,189,361		$	2,249,614

All land in the PRC belongs to the government of the PRC. Enterprises and individuals can pay the PRC government 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. These land use rights can be sold, purchased, and exchanged in the market. The successive owner of the land use right will have the right to use the land for the time remaining on the initial period. The patents have amortized life of 10 years.

Amortization expenses were $237,365 and $228,859 for the six months ended December 31, 2020 and 2019, respectively.

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NOTE 8 - RELATED PARTY DEBTS

Related party debts, which represent temporary short-term loans from Mr. Xin Sun and Mr. Kai Sun, consisted of the following:

	December 31, 2020		June 30, 2020
Mr. Xin Sun	$	7,863,748	$	7,226,764
Mr. Kai Sun		35,838		33,098
Total	$	7,899,586	$	7,259,862

These loans are unsecured, non-interest bearing, and have no fixed terms of repayment; therefore, they are deemed payable on demand. Mr. Kai Sun is a PRC citizen and a family member of Mr. Xin Sun, the CEO of the Company.

NOTE 9 - INCOME TAXES

(a) Corporate income taxes

United States

China Health US was organized in the United States. China Health US had no taxable income for US income tax purposes for the six months ended December 31, 2020 and 2019. As of December 31, 2020, China Health US had a net operating loss carry forward for United States income tax purposes. Net operating loss carry forwards are available to reduce future years’ taxable income. Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s operating history and the continued losses of its US entity. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. There were no changes in the valuation allowance for the six months ended December 31, 2020 and 2019. Management reviews this valuation allowance periodically and makes adjustments accordingly.

Hong Kong

China Health HK was incorporated in Hong Kong and is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provision for income taxes have been made because China Health HK has no taxable income in Hong Kong.

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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 of the Company consisted of the following for the six months ended December 31, 2020 and 2019:

	For the Three Months Ended				For the Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Current provision:
USA	$	-	$	-	$	-	$	-
PRC		344,742		555,896		618,935		868,403
Total current provision		344,742		555,896		618,935		868,403
Deferred provision:		-		-		-		-
USA		-		-		-		-
PRC		-		-		-		-
Total deferred provision		-		-		-		-
Total provision for income taxes	$	344,742	$	555,896	$	618,935	$	868,403

Significant components of deferred tax assets of the Company were as follows:

	December 31,			June 30,
	2020			2020
Deferred tax assets
Net operating loss carry forward	$	1,156,708		$	1,075,533
Allowances for doubtful accounts		19,107			17,001
Valuation allowance		(1,169,529	)		(1,086,728	)
Total	$	6,286		$	5,806

(b) Uncertain tax positions

There were no unrecognized tax benefits as of December 31, 2020 and June 30, 2020. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its tax positions. For the six months ended December 31, 2020 and 2019, the Company did not incur any interest or penalties arising from its tax payments.

NOTE 10 - 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 dilutive earnings per share. It assumes that any proceeds would be used to purchase common stock at the average of the 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.

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For the six months ended December 31, 2020 and 2019, the Company did not have potential dilutive shares. The following table sets forth the computation of basic and diluted net income per share:

	For the Three Months Ended				For the Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Net income/(loss) attributable to China Health Industries Holdings	$	816,043	$	1,426,584	$	1,455,735	$	2,183,158
Net income/(loss) per share:
Basic & diluted	$	0.0125	$	0.0218	$	0.0222		0.0333
Weighted average shares outstanding:
Basic & diluted		65,539,737		65,539,737		65,539,737		65,539,737

NOTE 11 - 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 December 31, 2020.

NOTE 12 - MAJOR SUPPLIERS AND CUSTOMERS

For the six months ended December 31, 2020, the Company had three suppliers that in the aggregate accounted for 78% of the Company’s purchases, with each supplier accounting for 39%, 22%, and 17%, respectively.

For the six months ended December 31, 2019, the Company had three suppliers that in the aggregate accounted for 75% of the Company’s purchases, with each supplier accounting for 35%, 20%, and 20%, respectively.

For the six months ended December 31, 2020, the Company had six customers that in the aggregate accounted for 89% of the Company’s total sales, with each customer accounting for 22%, 18%, 16%, 12%, 12%, and 9%, respectively.

For the six months ended December 31, 2019, the Company had six customers that in the aggregate accounted for 81% of the Company’s total sales, with each customer accounting for 20%, 16%, 15%, 11%, 11%, and 8%, respectively.

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NOTE 13 - SEGMENT REPORTING

The Company is organized into the following three main business segments based on the types of products being provided to customers: HLJ Huimeijia, Humankind, and “Others”. Each of the three aforementioned operating segments has separate and distinct general ledgers. The chief operating decision maker (“CODM”) receives financial information, including information regarding revenue, gross margin, operating income, and net income, 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 (loss) by segment.

The following tables present summary information by segment for the three and six months ended December 31, 2020 and 2019, respectively:

	For the Three Months Ended December 31, 2020										For the Three Months Ended December 31, 2019
	HLJ										HLJ
	Huimeijia			Humankind		Others			Consolidated		Huimeijia			Humankind		Others			Consolidated
Revenues	$	1,217		$	3,088,499	$	-		$	3,089,716	$	8,894		$	3,413,094	$	-		$	3,421,988
Cost of revenues		4,330			1,290,003		-			1,294,333		4,528			681,982		-			686,510
Gross profit (loss)		(3,113	)		1,798,496		-			1,795,383		4,366			2,731,112		-			2,735,478
Interest income(expense)		2			34,296		2			34,300		-			-		-			-
Depreciation and amortization		15,458			136,810		-			152,268		21,451			129,301		-			150,752
Income tax		-			344,742		-			344,742		-			555,896		-			555,896
Net income (loss)		(65,131	)		1,061,740		(180,566	)		816,043		(163,903	)		1,667,687		(77,200	)		1,426,584
Total capital expenditures		11,221			-		-			11,221		1			22,435		-			22,436
Total assets	$	3,514,254		$	51,798,441	$	(1,313,928	)	$	53,998,767	$	3,530,191		$	45,384,617	$	(931,560	)	$	47,983,248

	For the Six Months Ended December 31, 2020										For the Six Months Ended December 31, 2019
	HLJ										HLJ
	Huimeijia			Humankind		Others			Consolidated		Huimeijia			Humankind			Others			Consolidated
Revenues	$	13,214		$	5,268,584	$	-		$	5,281,798	$	35,829		$	5,440,083		$	-		$	5,475,912
Cost of revenues		53,660			2,192,453		-			2,246,113		39,536			1,155,870			-			1,195,406
Gross profit		(40,446	)		3,076,131		-			3,035,685		(3,707	)		4,284,213			-			4,280,506
Interest income(expense)		4			66,395		4			66,403		-			-			(3	)		(3	)
Depreciation and amortization		41,919			268,221					310,140		30,772			259,144			-			289,916
Income tax					618,935					618,935					(868,403	)		-			(868,403
Net income (loss)		(171,946	)		1,809,591		(181,910	)		1,455,735		(262,198	)		2,605,207			(159,851	)		2,183,158
Total capital expenditures		11,366			-		-			11,366		572			130,964			-			131,536
Total assets	$	3,514,254		$	51,798,441	$	(1,313,928	)	$	53,998,767	$	3,530,191		$	45,384,617		$	(931,560	)	$	47,983,248

NOTE 14 - 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 to disclose.

21

Item 2. 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 unaudited condensed 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.

22

Business Overview

Our principal business operations are conducted through our wholly-owned subsidiaries, Humankind and HLJ Huimeijia.

The Company owns a GMP-certified plant and production facilities and has the capacity to produce 21 different NMPA-approved medicines, 14 NMPA-approved health supplement products and 8 hemp derivative products in soft capsule, hard capsule, tablet, granule, 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 began to sell these products since May 2018. Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide are sold through Humankind, Other cosmetics are sold through HLJ Huimeijia. The revenue of the Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide accounted for 99.75% and 93.35% for the six-month periods ended December 31, 2020 and 2019, respectively.

Serial No.	Name
1	Hemp Oil
2	Hemp Protein Powder
3	Hemp Polypeptide
4	Collagen Peptide
5	Natural Hemp Essence Repair Lotion
6	Natural Hemp Revitalizing Essence
7	Natural Hemp Anit-aging Brightening Eye Cream
8	Natural Hemp Frozen Age Nourishing Cream

Our business is conducted through our sales agents and sales personnel. We sell our products directly to end customers through our own sales personnel as well as our sales agents, operating primarily 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 22%, 18%, 16%, 12%, 12%, and 9% of our total sales, respectively, for the six months ended December 31, 2020. Although we do not currently sell our products online, we expect to do so in the future.

23

Results of Operations

Three months ended December 31, 2020 compared to the three months ended December 31, 2019

The following table summarizes the top lines of the results of our operations for the three months ended December 31, 2020 and 2019, respectively:

	December 31,			December 31,
	2020			2019		Variance			%
Revenues	$	3,089,716		$	3,421,988	$	(332,272	)		(9.71	)%
Humankind		3,088,499			3,413,094		(324,595	)		(9.51	)%
HLJ Huimeijia		1,217			8,894		(7,677	)		(86.32	)%
Cost of Goods Sold	$	1,294,333		$	686,510	$	607,823			88.54	%
Humankind		1,290,003			681,982		608,021			89.15	%
HLJ Huimeijia		4,330			4,528		(198	)		(4.37	)%
Gross Profit	$	1,795,383		$	2,735,478	$	(940,095	)		(34.37	)%
Humankind		1,798,496			2,731,112		(932,616	)		(34.15	)%
HLJ Huimeijia		(3,113	)		4,366		(7,479	)		(171.30	)%

Revenue

Total revenues decreased by $332,272 or 9.71% for the three months ended December 31, 2020, as compared to the same period in 2019. The decrease in revenues was primarily due to a decrease of $324,595 or 9.51% in Humankind’s revenues, and a decrease of $7,677 in HLJ Huimeijia’s revenues for the three months ended December 31, 2020 as compared to the same period in 2019. The decrease in Humankind’s sales revenues was primarily due to the discounts we offered on our major products, while the sales volume increased compared to the same period in 2019. The decrease in HLJ Huimeijia’s sales revenues was primarily due to the outbreak of COVID-19 pandemic, which resulted in the cease of production of HLJ Huimeijia.

Our total cost of goods sold increased by $607,823 or 88.54% for the three months ended December 31, 2020 as compared to the same period in 2019. This increase was mainly due to the increase in sales volume caused by the discounts and promotions we offered during this period, while unit cost remained and the total cost of goods sold increased.

Our gross margin decreased by $940,095 or 34.37% for the three months ended December 31, 2020 as compared to the same period in 2019. The decrease in gross profit was primarily due to the discounts we offered on our major products, which led to a decrease in the sales unit price while the unit cost remained unchanged.

Sales by Product Line

The following table summarizes a breakdown of our sales by major product lines for the three months ended December 31, 2020 and 2019 respectively:

	December 31, 2020							December 31, 2019
	Quantity				% of			Quantity				% of
	(Unit)		Sales US$		Sales			(Unit)		Sales US$		Sales
Humankind
Hemp Oil		51,329	$	1,070,558		34.29	%		35,948	$	1,474,698		42.24	%
Collagen Peptide		26,545		332,184		10.64	%		25,885		730,237		20.92	%
Hemp Polypeptide		45,876		958,210		30.70	%		22,165		1,107,209		31.72	%
Hemp Protein Powder		60,773		759,458		24.33	%		13,306		175,059		5.01	%
HLJ Huimeijia
Muskiness Bone Strengthener Paste		1,480		336		0.01	%		3,309		1,293		0.04	%
Dampness dispelling pain ointment		975		296		0.01	%		3,222		999		0.03	%
Refining Cream dogskin		800		146		0.01	%		1,530		402		0.01	%
Indometacin and Furazolidone Suppositories		1,645		438		0.01	%		3,551		871		0.02	%
ShangBiTongDing		-		-		-	%		40		147		0.01	%
Total		189,423	$	3,121,626		100.00	%		108,956	$	3,490,915		100.00	%

24

Operating Expenses

The following table summarizes our operating expenses for the three months ended December 31, 2020 and 2019, respectively:

	December 31, 2020		December 31, 2019		Variance			%
Operating Expenses
Selling, general and administrative	$	516,959	$	633,303	$	(116,344	)		(18.37	)%
Depreciation and amortization		152,268		150,752		1,516			1.01	%
Total Operating Expenses	$	669,227	$	784,055	$	(114,828	)		(14.65	)%

Total operating expenses for the three months ended December 31, 2020 were $114,828 or 14.65% lower than those in the corresponding period in 2019. The decrease in operating expenses was primarily attributable to decrease of $116,344 or 18.37% in selling, general and administrative expenses. The decrease in selling, general and administrative expenses was mainly due to lower staff cost.

Interest Income and Interest Expense

Interest income was $34,300 for the three months ended December 31, 2020, as compared to $31,293 for the three months ended December 31, 2019. This increase of $3,007, or 10%, was mainly due to the increased average balance of bank deposits compared with the same period of 2020.

Interest expense was $nil for the three months ended December 31, 2020 and for the three months ended December 31, 2019.

Income Taxes

Income taxes decreased by $211,154, or 38%, from $555,896 for the three months ended December 31, 2019 to $344,742 for the three months ended December 31, 2020. The decrease in income taxes was mainly due to the decrease of the Company’s gross profit in the amount of $940,095, from the gross profit of $2,735,478 for the three months ended December 31, 2019 to the gross profit of $1,795,383 for the three months ended December 31, 2020.

25

Net Income and Net Income Per Share

Net Income was $816,043 for the three months ended December 31, 2020, as compared to $1,426,584 for the three months ended December 31, 2019. This decrease of $610,541 in net income was primarily attributable to a decrease of gross margin. Revenue section mentioned the gross profit decreased due to the discounts we offered on our major products with the unchanged unit cost. The decrease of gross profits further caused the decrease in the net income.

Net Income per share was $0.0125 for the three months ended December 31, 2020 and $0.0218 for the three months ended December 31, 2019, respectively. This decrease was primarily a result of the aforementioned decrease in net profit.

Six months ended December 31, 2020 compared to the six months ended December 31, 2019

The following table summarizes the top lines of the results of our operations for the six months ended December 31, 2020 and 2019, respectively:

	December 31,			December 31,
	2020			2019			Variance			%
Revenues	$	5,281,798		$	5,475,912		$	(194,114	)		(3.54	)%
Humankind		5,268,584			5,440,083			(171,499	)		(3.15	)%
HLJ Huimeijia		13,214			35,829			(22,615	)		(63.12	)%
Cost of Goods Sold	$	2,246,113		$	1,195,406		$	1,050,707			87.90	%
Humankind		2,192,453			1,155,870			1,036,583			89.68	%
HLJ Huimeijia		53,660			39,536			14,124			35.72	%
Gross Profit	$	3,035,685		$	4,280,506		$	(1,244,821	)		(29.08	)%
Humankind		3,076,131			4,284,213			(1,208,082	)		(28.20	)%
HLJ Huimeijia		(40,446	)		(3,707	)		(36,739	)		991.07	%

Revenue

Total revenues decreased by $194,114 or 3.54% for the six months ended December 31, 2020, as compared to the same period in 2019. The decrease in revenues was primarily caused by a decrease of $171,499 or 3.15% in Humankind’s revenues, and a decrease of $22,615 in HLJ Huimeijia’s revenues for the six months ended December 31, 2020 as compared to the same period in 2019. The decrease in Humankind’s sales revenues was primarily due to discounts we offered on our major products while the sales volume increased compared to the same period in 2019.

Our total cost of goods sold increased by $1,050,707 or 87.90% for the six months ended December 31, 2020 as compared to the same period in 2019. This increase was mainly due to the increase in sales volume caused by the discounts and promotions we offered during this period, while unit cost remained and the total cost of goods sold increased.

Our gross margin decreased by $1,244,821 or 29.08% for the six months ended December 31, 2020 as compared to the same period in 2019. The decrease in gross profit was primarily due to the discounts we offered on our major products, which led to a decrease in the sales unit price while the unit cost remained unchanged.

26

Sales by Product Line

The following table summarizes the breakdown of our sales by major product lines for the six months ended December 31, 2020 and 2019 respectively:

	December 31, 2020							December 31, 2019
	Quantity				% of			Quantity				% of
	(Unit)		Sales US$		Sales			(Unit)		Sales US$		Sales
Humankind
Hemp Oil		89,333		1,829,053		34.27	%		57,501		2,337,103		42.16	%
Collagen Peptide		45,677		561,326		10.52	%		44,927		1,253,654		22.61	%
Hemp Polypeptide		82,952		1,698,239		31.82	%		32,543		1,328,057		23.95	%
Hemp Protein Powder		100,480		1,235,037		23.14	%		21,261		595,377		10.74	%
HLJ Huimeijia
Muskiness Bone Strengthener Paste		39,481		5,326		0.10	%		34,533		8,398		0.15	%
Dampness dispelling pain ointment		19,638		2,735		0.05	%		33,059		7,700		0.14	%
Refining Cream dogskin		15,850		2,120		0.04	%		17,103		4,554		0.08	%
Indometacin and Furazolidone Suppositories		21,335		3,033		0.06	%		37,906		2,455		0.04	%
ShangBiTongDing		-		-		-			519		611		0.01	%
Enema Glycerini and Essence repair liquid		-		-		-			2,580		6,930		0.12	%
Total		414,746	$	5,336,869		100.00	%		281,932	$	5,544,839		100.00	%

Operating Expenses

The following table summarizes our operating expenses for the six months ended December 31, 2020 and 2019, respectively:

	December 31, 2020		December 31, 2019		Variance			%
Operating Expenses
Selling, general and administrative	$	717,291	$	1,000,291	$	(283,000	)		(28.29	)%
Depreciation and amortization		310,140		289,916		20,224			6.98	%
Total Operating Expenses	$	1,027,431	$	1,290,207	$	(262,776	)		(20.37	)%

Total operating expenses for the six months ended December 31, 2020 were $262,776 or 20.37% lower than those in the corresponding period in 2019. The decrease in operating expenses was primarily attributable to decrease of $283,000 or 28.29% in selling, general and administrative expenses. The decrease in selling, general and administrative expenses was mainly due to the lower staff cost.

Interest Income and Interest Expense

Interest income was $66,403 for the six months ended December 31, 2020, as compared to $62,041 for the six months ended December 31, 2019. This increase of $4,362, or 7%, was mainly due to the increased average balance of bank deposits compared with the same period of 2020.

Interest expense was $nil for the six months ended December 31, 2020 and for the six months ended December 31, 2019.

Income Taxes

Income taxes decreased by $249,468, or 29%, from $868,403 for the six months ended December 31, 2019 to $618,935 for the six months ended December 31, 2020. The decrease in income taxes was mainly due to the decrease of the Company’s gross profit in the amount of $1,244,821, from the gross profit of $4,280,506 for the six months ended December 31, 2019 to the gross profit of $3,035,685 for the six months ended December 31, 2020.

27

Net Income and Net Income Per Share

Net income was $1,455,735 for the six months ended December 31, 2020, as compared to $2,183,158 for the six months ended December 31, 2019. This decrease of $727,423 in net income was primarily attributable to a decrease of gross margin. Revenue section mentioned the gross profit decreased due to the discounts we offered on our major products with the unchanged unit cost. The decrease of gross profits further caused the decrease in the net income.

Net income per share was $0.0222 for the six months ended December 31, 2020 and $0. 0.0333 for the six months ended December 31, 2019, respectively. This decrease was primarily a result of the aforementioned decrease in net profit.

Liquidity and Capital Resources

We believe our current working capital position, together with our expected future cash flows from operations and loans from our major shareholder, will be adequate to fund our operations in the ordinary course of business, anticipated capital expenditures, debt payment requirements, and other contractual obligations for at least the next twelve months. However, this belief is based upon many assumptions and is subject to numerous risks, and there can be no assurance that we will not require additional funding in the future.

The following table summarizes our cash and cash equivalents positions, our working capital, and our cash flow activities as of December 31, 2020 and June 30, 2020 and for the six months ended December 31, 2020 and 2019:

	December 31, 2020		June 30, 2020
Cash and cash equivalents	$	40,666,095	$	36,072,474
Working capital	$	37,978,619	$	33,223,104
Inventories	$	982,064	$	807,351

	For the Six Months ended December 31,,
	2020			2019
Cash provided by (used in):
Operating activities	$	2,462,504		$	1,728,466
Investing activities	$	(11,366	)	$	(149,845	)
Financing activities	$	-		$	-

For the six months ended December 31, 2020, our net increase in cash and cash equivalents totaled $ 4,593,621, which total was comprised of net cash provided by operating activities in the amount of $2,462,504, net cash used in investing activities in the amount of $11,366 and the effect of prevailing exchange rates on our cash position of $2,142,483.

For the six months ended December 31, 2019, our net increase in cash and cash equivalents totaled $1,168,296, which was comprised of net cash provided by operating activities in the amount of $1,728,466, net cash used in investing activities in the amount of $149,845 and the effect of the prevailing exchange rates on our cash position of $410,325.

Our working capital at December 31, 2020 was $37,978,619, compared to working capital of $33,223,104 at June 30, 2020. This increase of $4,755,515 or 14% was primarily attributable to the increase of cash and cash equivalents in the amount of $4,593,621.

Net cash provided by operating activities was $2,462,504 for the six months ended December 31, 2020, primarily attributable to net income in the amount of $1,455,735 and a decrease of accounts receivable in the amount of $529,591. The positive effect of exchange rate changes on cash and cash equivalents in the amount of $2,142,483 for the six months ended December 31, 2020 was mainly a result of the effect of the valuation of the RMB against the USD on the significant amount of cash and cash equivalents held by the Company in RMB. The exchange rates from USD to RMB were 7.0650 to 1 and 6.5250 to 1 as of June 30, 2020 and December 31, 2020, respectively, and the average exchange rate from USD to RMB was 6.7741 for the six months ended December 31, 2020.

28

Net cash provided by operating activities was $1,728,466 for the six months ended December 31, 2019, which primarily comes from net income of $2,183,158.  Net cash used in investing activities was $149,845 for the six months ended December 31, 2019, primarily due to expenditures in property, plant and equipment of $130,964. The negative effect of exchange rate changes on cash and cash equivalents in the amount of $410,325 for the six months ended December 31, 2019 was mainly a result of the effect of the depreciation of the value of RMB for USD. The exchange rates from USD to RMB were 6.8668 to 1 and 6.9618 to 1 as of June 30, 2019 and December 31, 2019, respectively, and the average exchange rate from USD to RMB was 7.0297 for the six months ended December 31, 2019.

Other than as described in this report, we have no present agreements or commitments with respect to any material acquisitions of businesses, products, product rights, technologies, or any other material capital expenditures. However, we will continue to evaluate acquisitions of, and/or investments in, products, technologies, capital equipment or improvements, or companies that complement our business and may make such acquisitions and/or investments in the future. Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions and/or investments. We may not be able to obtain such financing on commercially reasonable terms, if at all. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

Related Party Debts

We had related party debts in the amount of $7,899,586 as of December 31, 2020, as compared to $7,259,862 as of June 30, 2020, an increase of $639,724 or 9%. Our related party debts mainly consist of a loan from Mr. Xin Sun, the CEO of the Company. The loan is unsecured, non-interest bearing, and has no fixed terms of repayment. There was no written agreement for the loan. See Note 8.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are currently material or reasonably likely to be material to its financial position or results of operations.

Critical Accounting Policies and Estimates

We prepare the unaudited condensed consolidated financial statements in accordance with US GAAP. These accounting principles require us to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information, and assumptions that we believe to be reasonable.

There have been no material changes during the three months ended December 31, 2020 in the Company’s significant accounting policies to those previously disclosed in the annual report on Form 10-K for the fiscal year ended June 30, 2020.

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in our reports filed under the Securities Exchange Act of 1934, as amended (the “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 Management, including the Company’s chief executive and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

At the conclusion of the period ended December 31, 2020, the Company carried out an evaluation, under the supervision and with the participation of Management, including the Company’s principal executive and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the Company’s principal executive and principal financial officer concluded that, due to the material weakness in the Company’s internal controls over financial reporting as discussed in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2020, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures were not effective to satisfy the objectives for which they are intended.

Despite the material weakness referenced above, Management believes that the Company’s unaudited condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented because the Company has retained a consultant who has U.S. GAAP experience to assist the Company in the preparation of its unaudited condensed consolidated financial statements.

Changes in Internal Controls over Financial Reporting

No changes in the Company’s internal controls over financial reporting have come to Management’s attention during the quarter ended December 31, 2020 that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Controls

Management does not expect that the Company’s disclosure controls and procedures or the Company’s 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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PART II - OTHER INFORMATION

Item 6. Exhibits.

The exhibits required by this item are set forth in the Exhibit Index attached hereto.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CHINA HEALTH INDUSTRIES HOLDINGS, INC.
/s/ Xin Sun
By:	Xin Sun
Title:	Chief Executive Officer and Chief Financial Officer
	(Principal Executive Officer, Principal Financial Officer and
	Principal Accounting Officer)
Date:	February 10, 2021

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EXHIBIT INDEX

Exhibit No.	Description
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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