Item 1.
Business.
China Health Industries Holdings, Inc. (“China
Health US”, “we”, “our”, or “us”) is not a Chinese operating Company, but a Delaware holding
company. Our operations are solely conducted through our subsidiaries in PRC. By investing in the securities of us, you are holding the
common stock of the Delaware holding company, under no circumstance will you have any shares of any of our operating PRC subsidiaries.
Our
History and Corporate Structure
China
Health Industries Holdings, Inc. (“China Health US”) was incorporated in the State of Arizona on July 11, 1996 and was the
successor of the business known as Arizona Mist, Inc. which began in 1989. On May 9, 2005, it entered into a stock purchase agreement
and share exchange (effecting a reverse merger) with Edmonds 6, Inc. (“Edmonds 6”), a Delaware corporation, and changed its
name to Universal Fog, Inc. Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous operation since 1996) became
a wholly-owned subsidiary of Edmonds 6.
China
Health Industries Holdings Limited (“China Health HK”) was incorporated on July 20, 2007 in Hong Kong under the Companies
Ordinance as a limited liability company. China Health HK was formed for the purpose of seeking and consummating a merger or acquisition
with a business entity organized as a private corporation, partnership, or sole proprietorship as defined by FASB ACS Topic 915 (“Development
Stage Entities”).
Harbin
Humankind Biology Technology Co., Limited (“Humankind”) was incorporated in Harbin City, Heilongjiang Province, the People’s
Republic of China (the “PRC”) on December 14, 2003, as a limited liability company under the Company Law of the PRC. Humankind
is engaged in the manufacturing and sale of health products.
On
August 20, 2007, the sole shareholder of China Health HK entered into a share purchase agreement (the “Share Purchase Agreement”)
with the owners of Humankind. Pursuant to the Share Purchase Agreement, China Health HK purchased 100% of the ownership in Humankind
for a cash consideration of $60,408 (the “Share Purchase”). Subsequent to the completion of the Share Purchase, Humankind
became a wholly-owned subsidiary of China Health HK. The Share Purchase was accounted for as a “reverse merger” since the
owner of Humankind owned a majority of the outstanding shares of China Health HK’s common stock immediately following the execution
of the Share Purchase Agreement, it was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities
and the historical operations that have been reflected in the financial statements for periods prior to the Share Purchase are those
of Humankind and have been recorded at the historical cost basis. After completion of the Share Purchase, China Health HK’s consolidated
financial statements include the assets and liabilities of both China Health HK and Humankind, the historical operations of Humankind,
and the operations of China Health HK and its subsidiaries from the closing date of the Share Purchase onward.
On
October 14, 2008, Humankind set up a 99% owned subsidiary, Harbin Huimeijia Medicine Company (“Huimeijia”), with its primary
business being manufacturing and distributing medicine. Mr. Xin Sun, the Company’s majority owner, owns 1% of Huimeijia. Huimeijia
is consolidated in the consolidated financial statements of China Health HK.
On
December 31, 2008, China Health HK entered into a reverse merger with Universal Fog, Inc., a U.S. publicly traded shell company (the
“Transaction”). China Health HK is the acquirer in the Transaction, and the Transaction was treated as a recapitalization
of China Health US. After the Transaction and a 20:1 reverse stock split, Mr. Xin Sun owned 61,203,088 shares of common stock, representing
98.3% of the 62,234,737 total outstanding shares of common stock of China Health US. On April 7, 2009, Mr. Sun transferred 28,200,000
shares of common stock to 296 individuals, leaving him with 33,003,088 shares of common stock of China Health US, or approximately 53.03%
of the total outstanding shares of common stock. Universal Fog, Inc. changed its name to China Health Industries Holdings, Inc. on February
19, 2009.
On
November 22, 2013, Humankind completed the acquisition of Heilongjiang Huimeijia Pharmaceutical Co., Ltd. (“HLJ Huimeijia”)
for a total purchase price of $16,339,869 (RMB100,000,000). HLJ Huimeijia was founded on October 30, 2003, and is engaged in the manufacturing
and distribution of tincture, ointments, rubber paste (including hormones), topical solution, suppositories, liniment (including traditional
Chinese medicine extractions), enemas and oral liquids. HLJ Huimeijia’s predecessor is Heilongjiang Xue Du Pharmaceutical Co.,
Ltd., which has established its brand name in the market through its supply of high-quality medical products. HLJ Huimeijia is categorized
as a “high and new technology” enterprise by the Science Technology Department in Heilongjiang Province. HLJ Huimeijia has
21 products which have been approved by, and have received approval numbers issued by, the National Medical Products Administration (“NMPA”).
In addition, HLJ Huimeijia is the holder of one patent for utility models, five patents for external design and three trademarks in China,
including the Chinese brand name of “Xue Du” which has an established reputation among customers in northeastern China.
On
December 24, 2014, Humankind entered into a stock transfer agreement (the “Original Agreement”) with (i) Xiuzheng Pharmaceutical
Group Co., Ltd. a company incorporated under the laws of the PRC and located in Jilin province (“Xiuzheng Pharmacy” or the
“Buyer”), (ii) Mr. Xin Sun, the CEO of the Company, and (iii) Huimeijia, a subsidiary of Humankind that is 99% owned by Humankind
and 1% owned by Mr. Xin Sun. Pursuant to the Original Agreement, Humankind and Mr. Xin Sun (collectively, the “Equity Holders”),
would sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy.
On
February 9, 2015, the four parties entered into a supplementary agreement (the “Supplementary Agreement”) to modify the terms
of the Original Agreement, pursuant to which the Equity Holders and Huimeijia (collectively, the “Asset Transferors”) would
only sell 19 drug approval numbers (the “Assets”) to Xiuzheng Pharmacy. The Equity Holders would have retained their equity
interests in Huimeijia, but would have pledged such equity interests to Xiuzheng Pharmacy until the Assets were transferred.
On
October 12, 2016, the four parties agreed to rescind the Supplementary Agreement and entered into a new supplementary agreement pursuant
to which the parties agreed to execute the transfer of the equity interests based on the Original Agreement, and the Equity Holders sold
their respective equity interests in Huimeijia to Xiuzheng Pharmacy for total cash consideration of RMB 8,000,000 (approximately $1,306,186
USD, the “Purchase Price”) to the Equity Holders. As of October 12, 2016, Huimeijia had completed changes in its business
registration, and Xiuzheng Pharmacy had obtained a new business license issued by the local State Administration of Industry and Commerce
in Harbin (“Harbin SAIC”) for Huimeijia, in which Huimeijia’s ownership was recorded as held by Xiuzheng Pharmacy,
and the legal representative (a person that is authorized to take most corporate actions on behalf of a company under PRC corporate laws)
of Huimeijia had been appointed by the Buyer.
China
Health US, China Health HK, Humankind and HLJ Huimeijia are collectively referred herein to as the “Company.”
As
of June 30, 2022, the Company’s corporate structure was as follows:
Business
Overview
Our
principal business operations are conducted through our wholly-owned subsidiaries, Humankind and HLJ Huimeijia.
The
Company owns a GMP-certified plant and production facilities and has the capacity to produce 21 different NMPA-approved medicines, 14
NMPA-approved health supplement products and 8 hemp derivative products in soft capsule, hard capsule, tablet, granule, oral liquid forms.
These products address the needs of some key sectors in China, including the feminine, geriatric, and children’s markets.
HLJ
Huimeijia was founded on October 30, 2003 and its latest GMP certificate is effective until April 24, 2023. HLJ Huimeijia engages in
the manufacture and distribution of tincture, ointments, rubber paste, including hormones, topical solution, suppositories, enemas, oral
liquids, and liniment, including traditional Chinese medicine extractions. HLJ Huimeijia’s predecessor was Heilongjiang Xue Du
Pharmaceutical Co., Ltd., which established brand recognition in the market through its supply of high-quality drug products. HLJ Huimeijia
is a “high and new technology” enterprise that provides the most comprehensive types of topical medical products in Heilongjiang
Province, a northeastern province of China.
We
sell our products directly to end customers through our own sales personnel as well as our sales agents, operating primarily in Anhui,
Zhejiang, Shanghai, Jiangsu, Beijing and Gansu, where most of our revenues are generated. However, there is no such sales for the fiscal
year 2022,which was primarily due to Humankind’s enterprise transformation, and the lock down of factory due to COVID-19. Humankind
is using existing materials to research and develop new products. Humankind decided to transform the primary business to CBD extractive
project, because the government intended to support the company research in CBD aspect. However, by the end of fiscal year 2022, the
support guidelines had not been published. Although the research process is slow and unpredictable due to the zero-case policy and periodic
quarantines caused by COVID-19 resurgence, we expect the CBD extractive project to be completed by the end of calendar year of 2022 (“Transformation”).
We do not currently sell our products online, but we expect to do so in the future.
There
is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as such, the extent of the business
disruption and the related financial impact cannot be reasonably estimated at this time.
Cash Transfer
For
the years ended June 30, 2022 and 2021, there is no cash transfer among China Health US, China Health HK, or any of our PRC subsidiaries.
We have not paid dividends on our common stock
and do not anticipate to pay such dividends in the foreseeable future. We will rely on dividends from Humankind for our funds and PRC
regulations may limit the amount of funds distributed to us from Humankind, which will affect our ability to declare any dividends.
China Health US may encounter several limitations
related to cash transfer among its PRC subsidiaries, the holding company and its investors. Any funds we transfer to the PRC subsidiaries,
either as a shareholder loan or as an increase in registered capital, are subject to permission and approval by or registration with
relevant governmental authorities in China. According to the relevant PRC regulations on foreign invested enterprises in China, capital
contributions to our PRC subsidiaries are subject to the registration with the State Administration for Market Regulation or its local
counterpart and registration with a local bank authorized by SAFE. In addition, (i) any foreign loan procured by our PRC subsidiaries
is required to be registered with the SAFE or its local branches and (ii) any of our PRC subsidiaries may not procure loans which exceed
the difference between its total investment amount and registered capital or, as an alternative, only procure loans subject to the calculation
approach and limitation as provided by the People’s Bank of China. As a holding company with no operations, our ability to distribute
dividends largely depends on the distribution from our PRC subsidiaries. In addition, if China Health US is determined to be a PRC resident
enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially
reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident
enterprises, including the holders of our ordinary shares, and non-resident enterprise shareholders (including our ordinary shareholders)
may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ordinary shares, if such income is treated
as sourced from within China. An “indirect transfer” of PRC assets, including a transfer of equity interests in an unlisted
non-PRC holding company of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct
transfer of the underlying PRC assets, if such arrangement does not have a reasonable commercial purpose and was established for the
purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC
enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable
taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.
Products
We
are licensed to sell our products, including our medical drugs, only in the PRC.
(i) Hemp Derivative Products
We
have developed the following products that are derived from hemp and obtained business license to manufacture and sell these products.
We have begun to sell these products since May 2018. Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide are sold through
Humankind. Other products are sold through HLJ Huimeijia. The revenue of the Hemp Oil, Hemp Protein Powder and Hemp Polypeptide accounted
for nil and 89.88% of the total revenues for the fiscal year of 2022 and 2021, 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 |
(ii) Health Products
Our
“QunLe” brand Sailuozhi soft capsule, a supplement made from frog oil, soybean isoflavone, procyanidine (made from grape
seeds) and vitamin E, is for freckle removal and skin moisture. “QunLe” brand Sailuozhi soft capsulechanged name to “QunLe”
brand Frog Oil, Soybean Isoflavone and Vitamin E Soft Capsul, register number is G20070356, which expired on April 6, 2026.
On
May 12, 2010, we received a patent for this product (Patent No. 200610010394.4) under the name “Run Chao” (which has since
been changed to “QunLe”) with the National Bureau of Intellectual Property.
Pursuant
to a technology transfer agreement dated October 12, 2007 (the “2007 Technology Transfer Agreement”), we purchased a health
product known as “Kindlink” brand propolis and black ant capsule made from propolis, black ant, acanthopanax and astragalus
root from Beijing Jindelikang Bio-Technology Co., Ltd (“Jindelikang”). The change of the ownership has been approved by the
NMPA. This product is intended to boost one’s immunity. The certification number issued by the NMPA on August 20, 2004, for the
license to manufacture the product is GuoShiJianZi G20040906. We have no continuing obligations under the 2007 Technology Transfer Agreement.
Pursuant
to a technology transfer agreement dated January 18, 2013 (the “2013 Technology Transfer Agreement”), we purchased 12 health
products from Guangzhou Aoda Biology Beauty Healthy Technology Co., Ltd, a non-affiliated party. These twelve products are the following:
- | Dr.
Xiao Brand Honeysuckle Pearl Capsule (Guo Shi Jian Zi G20100656), which is designed to be effective in acne removal; |
- | Dr.
Xiao Brand Multivitamin Tablet (Guo Shi Jian Zi G20080176), which is a multivitamin and mineral supplement; |
- | Dr.
Xiao Brand Zhengdian Capsule (Guo Shi Jian Zi 20070261), which is designed to be effective in relieving eyestrain; |
- | Dr.
Xiao Brand Shengui Capsule (Guo Shi Jian Zi G20080297), which is designed to be effective in increasing bone density; |
- | Dr.
Xiao Brand Multivitamin Tablet (Woman) (Guo Shi Jian Zi G20070338), which is an iron and multivitamin supplement; |
- | Dr.
Xiao Brand Shikong Soft Capsule (Guo Shi Jian Zi 20080096), which is designed to be effective in improving memory; |
- | Dr.
Xiao Brand Huangjingdanggui Tablet (Guo Shi Jian Zi G20080201), which is designed to be effective in improving nutritional anemia and
chloasma; |
- | Dr.
Xiao Brand Xingxing Soft Capsule (Guo Shi Jian Zi G20080080), which is designed to be effective in improving memory; |
- | Dr.
Xiao Brand Vitamin A Fish Oil Soft Capsule (Guo Shi Jian Zi G20080406), which is designed to be effective in relieving eyestrain; |
- | Dr.
Xiao Brand Colon Cleanser Granules (Guo Shi Jian Zi G20060061), which is designed to be effective in relaxing bowels and promoting the
discharge of lead; |
- | Dr.
Xiao Brand Jianli Soft Capsule (Guo Shi Jian Zi G20050710), which is designed to be effective in increasing immunity and relieving physical
fatigue; and |
- | LB
Brand Xinpin Capsule (Guo Shi Jian Zi G20050770), which is designed to be effective in dispelling chloasma. |
The
major suppliers of raw materials for our products who exceeded 10% of our total purchases in the fiscal years 2022 and 2021 are the following:
| |
| |
Purchases | | |
| |
| |
| |
(in U.S. | | |
% of | |
| |
Name of Supplier | |
Dollars) | | |
Purchases | |
FY2022 | |
nil | |
| | |
| |
FY2021 | |
Shanxi Yuanshengtai Biotechnology Co. LTD | |
| 947,682 | | |
| 39.63 | % |
| |
Harbin Qianjin Packaging and Printing Co. LTD | |
| 524,996 | | |
| 21.95 | % |
| |
Wudi Zhenkang Biotechnology Co. LTD | |
| 391,795 | | |
| 16.38 | % |
In
the year ended June 30, 2022, the Company had no suppliers due to its being temporarily out of production. The Company typically signs
monthly purchase orders with its major suppliers. All purchase orders with our other suppliers are on similar terms. We shall remit payment
to a supplier’s account no later than three business days after receiving raw materials. A supplier shall deliver raw materials
no later than three business days after receiving a purchase order. The cost of delivery is borne by the supplier.
(iii) Medical Drugs
HLJ
Huimeijia has 21 products with approval numbers issued by the NMPA as following:
|
|
English
Name |
|
Efficacy |
1 |
|
Enema Glycerini |
|
Lubricating laxative. Used
for constipation. |
|
|
|
|
|
2 |
|
UmguentumAcidi Borici Camphoratum |
|
Dermerethistica. Used for
chilblain. |
|
|
|
|
|
3 |
|
Ge Hong Beriberi Water |
|
Dehumidification insecticide.
Used for tinea pedis and tinea manuum caused by damp toxin brewing and binding, and other skin diseases caused by enzyme. |
|
|
|
|
|
4 |
|
Pelvic Inflammation Suppository |
|
Heat-clearing and detoxifying;
activating blood to promote menstruation disperse swelling and relieve pain. Used for toxin and blood stasis stagnation in the uterus,
distending pain in the lower abdomen, irregular menses, algomenorrhea and leukorrhagia, as well as pelvic inflammation and annexitis
with the aforementioned symptoms. |
|
|
|
|
|
5 |
|
Injury and Paralysis Tincture |
|
Warm channel and expelling
cold, promoting blood circulation to arrest pain. Used to relieve pain caused by traumatic injury and sprain. |
|
|
|
|
|
6 |
|
Indometacin and Furazolidone Suppositories |
|
Anti – inflammatory
painkiller. Used to treat acute hemorrhoid, including internal hemorrhoids, external hemorrhoids, mixed hemorrhoids, anal fissure
or archosyrinx and relieve pain; Used to ease pain after the operation of anal fissure, archosyrinx or hemorrhoids. |
|
|
|
|
|
7 |
|
Injury and Rheumatism Relieving Paste |
|
Dispelling rheumatism and
relieving pain. Used for headache, rheumatalgia, neuralgia, sprain and muscular soreness. |
|
|
|
|
|
8 |
|
Refining GouPi Cream |
|
Relaxing tendon, invigorating
the circulation of blood, dissipating cold and relieving pain. Used for arthralgia and myalgia, acute contusion, sprain, rheumatalgia,
arthralgia, hypochondriac pain, muscular soreness, etc. |
|
|
|
|
|
9 |
|
Muskiness Pain Relieving Paste |
|
Expelling wind and removing
dampness, relaxing the tendons and unblocking collateral. Used for rheumatic arthralgia, low back cold pain, traumatic injury, etc.
|
|
|
English
Name |
|
Efficacy |
10 |
|
Muskiness Bone Strengthener Paste |
|
Analgesia and anti-inflammatory.
Used for rheumatalgia, arthralgia, backache, neuralgia, muscular soreness, sprain and contusion. |
|
|
|
|
|
11 |
|
Matrine Suppositories |
|
Antibacterial and antiphlogistic
drugs. Used for trichomonas and candida vaginitis, chronic cervicitis, pelvic inflammation, etc. |
|
|
|
|
|
12 |
|
Ethacriding Lactate Solution |
|
Disinfectant and preservative
drug. Used for disinfection of traumatic and disinfected wounds. |
|
|
|
|
|
13 |
|
Triamcinolone Acetonide and Neomycin Paste |
|
Used for neurodermatitis
circumscripta and chronic eczema. Also used for small-scale psoriasis. |
|
|
|
|
|
14 |
|
Double – Coptis Suppository |
|
Course wind and resolving
the exterior, heat-clearing and detoxifying. Used for influenza caused by affection of exogenous wind-heat, with symptoms of fever,
cough and sore throat. Also used for upper respiratory tract infections and pneumonia, with symptoms of fever, cough and sore throat.
|
|
|
|
|
|
15 |
|
Methylrosanilinium Chloride Solution |
|
Disinfectant and preservative
drug. |
|
|
|
|
|
16 |
|
Iodine Tincture |
|
Disinfectant and preservative
drug. |
|
|
|
|
|
17 |
|
Mercurochrome Solution |
|
Disinfectant and preservative
drug. |
|
|
|
|
|
18 |
|
Hydrogen Peroxide Solution |
|
Disinfectant and preservative
drug. |
|
|
|
|
|
19 |
|
Halcinonide Cream |
|
Grucocorticoid. External
use drug only to be used on the skin. Used for dermatoneuritis and psoriasis. |
|
|
|
|
|
20 |
|
Compound Fluocinonide Tincture |
|
Grucocorticoid. Used for
dermatoneuritis and psoriasis. |
|
|
|
|
|
21 |
|
Policresulen Vaginal Suppository |
|
Anti-microbial and hemostasis
drug. |
Distribution
Most
of our products are sold to sales agents. In the fiscal year of 2021, our sales network covered 5 provinces and 2 municipalities in China
and our products were mainly sold in Anhui, Zhejiang, Shanghai, Jiangsu, Beijing, Gansu, and Heilongjiang provinces or cities. In the
fiscal year of 2022, because of COVID-19 influence and the Transformation, we did not sell our products to sales agents.
E-business
We
are in the process of building the infrastructure to conduct our business over the internet. A B2C e-business call and sales center has
been established and will become an integral part of our distribution channel in the future. We have employed graduates from Tsinghua
University, Harbin Industry University and Harbin Engineering University to develop the ERP (Enterprise Resource Planning), CRM (Customer
Relationship Management) and Office Automation software (“OA Software”) for our e-business. The OA Software has been used
in our daily operation. The Company plans to sell its products via internet in the fiscal year of 2023.
Our
Customers
We
sell most of our products to sales agents, who are our customers. The sales agents sell the products to the end users.
Our
customers who contributed more than 10% of our consolidated revenues during the past two fiscal years are as follows:
| |
| |
Sales | | |
Percent of | |
Name | |
Products Sold | |
(in U.S. Dollars) | | |
Sales | |
FY2022 | |
nil | |
| | |
| |
FY2021 | |
| |
| | |
| |
Libin Wang | |
Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide | |
| 1,478,558 | | |
| 22.53 | % |
Yufeng Shen | |
Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide | |
| 1,185,711 | | |
| 18.07 | % |
Zhongying Shen | |
Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide | |
| 1,054,214 | | |
| 16.06 | % |
Suqin Zhang | |
Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide | |
| 819,996 | | |
| 12.49 | % |
Guangmin Meng | |
Hemp Oil, Hemp Protein Powder, Hemp Polypeptide, Collagen Peptide | |
| 761,259 | | |
| 11.60 | % |
In
the year end June 30, 2022, the Company had no customers due to the Transformation and the COVID-19.
Manufacture
We
manufacture our health food products on a plot of land located in Jin Xing Industrial Park, Songbei District, Harbin. On June 7, 2004,
the Company entered into a Land Use Purchase Contract with the local government, pursuant to which the Company agreed to purchase the
right to use a piece of land, approximately 8 acres (32,000 square meters), located in Harbin City, Heilongjiang Province for commercial
purposes for a fifty-year period from June 7, 2004 through June 6, 2054, for $637,261 (RMB5,248,000). The Company fully paid to the government
the consideration for the land use right on June 13, 2004. The Department of Housing and Urban Development of Harbin City approved this
transaction. The Company is in the process of applying for the title certificate from the local government. The manufacturing facility
on the land is 4,000 square meters and there are five production lines which are sufficient for our purposes. We package our products
in bottles, plastic containers and aluminum foil bags there.
Since
we acquired HLJ Huimeijia on November 22, 2013, we also manufacture our medicines and drugs using HLJ Huimeijia’s land, approximately
43,350 square meters, located in Hai-lin Economic Development Zone, Mudanjiang City. The manufacturing facilities occupy approximately
5,710 square meters. We plan to build new manufacturing facilities on the land. The expected construction cost is approximately $7,520,000
(RMB 50,000,000).
Our
Development Strategy
We
will continue to focus on combining our products with traditional Chinese medicine, creating new products such as our hemp-based products,
and developing our B2C e-business and chain-stores. We plan to implement health management projects in our future chain-stores throughout
China and establish a database of our clients’ health data obtained from our B2C e-business and call center.
We
plan to establish a one-stop shop for our customer’s health needs. From conducting a genetic profile of our customer to determine
his/her susceptibility to certain types of diseases and then customizing health supplements and organic/green food to meet his/her needs,
we plan to cater to our customer’s needs at all levels. With the distribution network we hope to establish through our chain stores
and B2C e-businesses, we plan to eventually branch out into the sale and distribution of beauty products and medical appliances.
We
plan to open chain stores of up to 100 stores within the next 24 months; establish our oversea sales to North America, South Asia and
European Union; acquire pharmaceuticals to enhance marketing network and production capacity and increase investment in research and
development of CBD drugs and hemp-based products.
The
Future
Within
the next ten years, our goals are to:
1.
Increase product coverage in target markets to achieve 20%-30% coverage
Our
target market is the health industry market. Presently, we believe that our product coverage is approximately 0.2%. We plan to open distribution
stores in different provinces of China to expand our coverage. We also plan to sell our products through B2C websites to our customers.
2. Develop to be among top 500 companies in the medicine, health product, health industry in the PRC
Currently,
we are not ranked in the top 500 medicine, health product and health industry companies in the PRC. We believe that if our projected
increase in revenue is achieved, we will achieve our goal of becoming one of the top 500 medicine, health product, health industry companies
in China.
3. Form a diversified management group
Currently,
our management group comprises graduates from the most prestigious universities in the PRC, such as Peking University and Renmin University
of China. We plan to further diversify our management group by hiring talent both in the PRC and abroad.
4. Enter into the international market and create an internationally famous brand
Currently,
our products are sold under the brand names “Qunle”, “Kindlink”, “Huimeijia” and “Dr. Xiao”
in the PRC. Our goal is eventually to establish stable sales abroad in countries such as the United States of America, Russia, and Eastern
Europe and South-east Asian countries.
Our
Business Plan
The
plans designed to meet our manufacturing, marketing and profit targets include:
Manufacturing:
| (a) | improving
the manufacturing techniques and staff training; |
| (b) | guaranteeing
high quality material supply; |
| (c) | strengthening
the working procedure controls; |
| (d) | implementing
GMP to ensure a compliance standard in the food and medical industries; |
| (e) | ensuring
that all employees have adequate training in health regulations. |
Marketing:
Adopt
an effective marketing strategy to:
| (a) | utilize
direct distribution of products to chain stores nationwide; |
| (b) | build
business alliances with well-known enterprises to create private label brands; |
| (c) | expand
the marketing of our products beyond the traditional methods. |
Product
Distribution:
| (a) | enlarge
our sales and marketing force while developing new markets; |
| (b) | strengthen
the distribution channel by developing promotion strategies and participating in trade shows; |
| (c) | Develop
3-5 new products to market each year; |
| (d) | develop
new markets through innovation and research. |
Our
approach to manufacturing, marketing, cost control and products distribution, which is detailed above, is designed to minimize production
costs and increase revenue at the same time. We feel that our procedures will enable us to reach our sales goals with an optimal manufacturing
cost. The result should yield profits and a return to our investors.
Good
Manufacturing Practice or “GMP” is a term that is recognized worldwide for the control and management of manufacturing and
quality control testing of foods and pharmaceutical products. An important part of GMP is documentation of every aspect of the process,
activities, and operations involved with drug and medical device manufacture. Additionally, GMP requires that all manufacturing and testing
equipment has been qualified as suitable for use, and that all operational methodologies and procedures (such as manufacturing, cleaning,
and analytical testing) utilized in the drug manufacturing process have been validated (according to predetermined specifications), to
demonstrate that they can perform their purported function(s). On December 1, 2019 the newly revised Drug Administration Law (the “New
Law”) came into effect. One of the major amendments is the cancellation of GMP certification. The New Law eliminated the requirement
that drug administration authorities shall assess drug manufacture enterprises and drug trading enterprises, and issue assessment certificates.
Instead, it requires that drug manufacturing enterprises and drug trading enterprises establish and improve the quality management systems
of manufacture and trade of drugs, and ensure that the process of manufacturing and trading of drugs always meets all legal requirements.
This means a stricter form of supervision is implemented comparing to the prior GMP certificates system and our production lines are
subject pilot inspection under the New Law.
The
Market for Healthcare and Beauty Products
The
health product industry is one of the mainstream industries in the PRC, since it has a high level of recognition and importance. Recently
there have been new policies for health products, which control quality, manufacturing, manufacturing environments and techniques.
The
Healthcare Product Market in the PRC
With
thousands of years of history in health culture and traditional Chinese medicine, the PRC currently utilizes advanced techniques and
production capacity to initiate new health care trends, from drugs and medicines to traditional health food and nutritional supplements,
and from medical devices to health management and advice. These trends demonstrate huge potential in the PRC’s health products
market.
With
the rise of the concept of “Great Health”, the per capita expenditure of health products and the consumer group have been
significantly improved.
Driven
by the change of consumer treatment to prevention, the promotion of health awareness, the refinement of health needs and the pursuit
of high-quality health products, the market scale of health products in China broke through RMB100 billion (USD16.2 billion) in 2014
and nearly RMB150 billion (USD22.2 billion) in 2017. Qianzhan Industry Research Institute in China predicted that the market scale of
health products in China will reach RMB 243.5 billion (USD37.7 billion) in 2025.
Comparing
the consumption habits of Chinese and American health products, we can see that there is still much room for development in China’s
market. The penetration rate of health products in the United States is 50%, while that in China is only 20%, and in terms of per capita
consumption, China is only one-eighth of that in the United States.
Legal and Operation Risks Associated with
Being Based in or Having the Majority of the Company’s Operations in China
China Health US’s PRC subsidiaries (as
defined below) face various legal and operational risks and uncertainties related to doing business in China. These risks could result
in a material adverse change in the Company’s business operations and cause the value of such securities to significantly decline
or be worthless.
The PRC subsidiaries were formed under and
are governed by the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference,
but have limited precedential value. As a significant part of our business is conducted in China, our operations are principally governed
by PRC laws and regulations. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations
and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections
available to us. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied
by other PRC government authorities (including local government authorities), thus making strict compliance with all regulatory requirements
impractical, or in some circumstances impossible. Considering PRC administrative and court authorities have discretion in interpreting
and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings
and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on
government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect.
As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties,
including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights,
could materially and adversely affect our business and impede our ability to continue our operations.
Furthermore, if China adopts more stringent
standards with respect to environmental protection or corporate social responsibilities, we may incur increased compliance costs or become
subject to additional restrictions in our operations. Intellectual property rights and confidentiality protections in China may also
not be as effective as in the United States or other countries. In addition, we cannot predict the effects of future developments in
the PRC legal system on our business operations, including the promulgation of new laws, or changes to existing laws or the interpretation
or enforcement thereof. These uncertainties could limit the legal protections available to us and our investors, including you. Moreover,
any litigation in China may be protracted and result in substantial costs and diversion of our resources and management attention.
China Health US’s corporate structure
as a Delaware holding company with operations primarily conducted by its subsidiaries in China involves unique risks to investors. Chinese
regulatory authorities could disallow this structure, which cause the incapability to continue operation without changing the corporate
structure or switching the business focus. This may in turn cause the value of the securities to significantly decline or even become
worthless. According to the Foreign Investment Law in China, the State Council shall promulgate or approve a list of special administrative
measures for market access of foreign investments, or the Negative List. The Foreign Investment Law grants national treatment to foreign-invested entities,
except for those foreign-invested entities that operate in industries specified as either “restricted” or “prohibited”
from foreign investment in the Negative List. The Foreign Investment Law provides that foreign-invested entities operating in “restricted”
or “prohibited” industries will require market entry clearance and other permissions or approvals from relevant PRC government
authorities. On December 27, 2021, the National Development and Reform Commission of China (“NDRC”) and the Ministry of Commerce
(“MOFCOM”) jointly issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition),
and the Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zones (Negative List) (2021 Edition), effective
January 1, 2022. As a company operating its business in pharmaceutical manufacture and distribution, which are not included in the 2021
Negative List, China Health US believes its business is not subject to any ownership restrictions. However, since the Negative List has
been adjusted and updated almost on an annual basis in the recent years, we cannot assure you that the aforementioned business segments
will continuously be beyond the “prohibited” category, which may significantly limit or completely hinder your ability to
offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. The
PRC government will also establish a foreign investment information reporting system, according to which foreign investors or foreign-invested
enterprises shall submit investment information to the competent department for commerce concerned through the enterprise registration
system and the enterprise credit information publicity system, and a security review system under which the security review shall be
conducted for foreign investment affecting or likely affecting the state security.
The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Furthermore,
recent statements made by the Chinese government have indicated an intent to increase the government’s oversight and control over
offerings of companies with significant operations in China that are to be conducted in foreign markets, as well as foreign investment
in China-based issuers like us. Our ability to operate in China may be harmed by changes in its laws and regulations. The central
or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would
require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly,
government actions in the future could have a significant effect on economic conditions in China or particular regions thereof, and could
require us to divest ourselves of any interest we then hold in Chinese properties. As such, our business segments may be subject to various
government and regulatory interference in the provinces in which they operate. We may incur increased costs necessary to comply with
existing and newly adopted laws and regulations or penalties for any failure to comply. The Chinese government may intervene or influence
our operations at any time with little advance notice, which could result in a material change in our operations and in the value of
our ordinary shares. Any actions by the Chinese government to exert more oversight and control over transaction that are conducted overseas
and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer
securities to investors and cause the value of such securities to significantly decline or be worthless.
On December 24, 2021, the China Securities
Regulatory Commission, or the “CSRC”, published draft regulations (the “Draft Rules”) on domestic enterprises
issuing securities and being listed overseas. The Draft Rules lay out specific filing requirements for overseas listing and offering
by PRC domestic companies and include unified regulation management and strengthening regulatory coordination. On February 17, 2023,
the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial
Measures”), which will take effect on March 31, 2023. The Trial Measures supersede the Draft Rules and clarified and emphasized
several aspects, which include but are not limited to: (1) criteria and exemptions to determine whether an issuer will be required to
go through the filing procedures under the Trial Measures; (2) a negative list of types of issuers banned from listing or offering overseas,
such as issuers whose affiliates have been recently convicted of bribery and corruption; (3) issuers’ compliance with web security,
data security, and other national security laws and regulations; (4) issuers’ filing and reporting obligations, such as obligation
to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering
or listing overseas to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer.
Because the Company’s shares have been trading on the over-the-counter market, the Trial Measures do not impose additional regulatory
burden on us beyond the obligation to report to the CSRC any future offerings of our securities, or material events such as a change
of control. As the Trial Measures are newly issued, there remains uncertainty as to how it will be interpreted or implemented. Therefore,
there is uncertainty that if we are subject to such filing requirements under the Trial Measures, we will be able to get clearance from
the CSRC in a timely fashion.
Permissions and Approvals
Recently, the General Office of the Central
Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful
Crackdown on Illegal Securities Activities, which was available to the public on July 6, 2021. These opinions emphasized the need to
strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. These
opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks
and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. Moreover, on
January 4, 2022, thirteen PRC regulatory agencies, namely, the Cyberspace Administration of China (“CAC”), the NDRC, the
Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of State Security, the Ministry of Finance,
MOFCOM, China State Administration for Market Regulation (“SAMR”), the China Securities Regulatory Commission (“CSRC”),
the People’s Bank of China, the National Radio and Television Administration, National Administration of State Secrets Protection
Network Data Security (draft for public comments), and the National Cryptography Administration, jointly adopted and published the Measures
for Cybersecurity Review (2021), which became effective on February 15, 2022. The Measures for Cybersecurity Review (2021) required that,
among others, in addition to “operator of critical information infrastructure”, any “operator of network platform”
holding personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to
cybersecurity review. As of the date of this annual report, (i) the Company does not hold personal information of over one million users;
(ii) the Company does not involve data processing activities that affect or may affect national security, and (iii) the Company has not
been informed by any PRC governmental authority of any requirement that it file for a cybersecurity review; therefore, based on the foregoing,
the Company believes it is not required to pass cybersecurity review of CAC. However, we cannot assure you that the Company will remain
fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all
and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our trading,
our financial condition, and our results of operations.
As of the date of this annual report, the
Company has obtained all the approvals and permissions required to operate business in the relevant industry. A list of permissions and
approvals is below:
No. | |
Name of Certificate/License | |
Issued Entity | |
Issuing Authority | |
Issuance Date | |
Expiration Date |
1 | |
Certificate of Good Manufacturing Practices
for Pharmaceutical Products | |
Heilongjiang Huimeijia Pharmaceutical Co.,
Ltd. | |
Heilongjiang Food and Drug Administration | |
April 25, 2018 | |
April 24, 2023 |
2 | |
Food Manufacturing Certificate | |
Harbin Humankind Biology Technology Co., Limited | |
Heilongjiang Harbin New District Administrative Examination
and Approval Bureau | |
December 6, 20212 | |
December 5, 2026 |
3 | |
Food Distribution License | |
Harbin Humankind Biology Technology Co., Limited | |
Heilongjiang Harbin New District Administrative Examination
and Approval Bureau | |
February 14, 2019 | |
February 13, 2024 |
However, if China Health US or its PRC subsidiaries
i) do not maintain such permissions or approvals; (ii) inadvertently conclude that such permissions or approvals are not required; or
(iii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals, we may have
to spend great efforts and expenses to obtain such clearance, otherwise it may materially and adversely affect our business, operating
results, financial condition and the value of our ordinary shares, significantly limit or completely hinder our ability to offer or continue
to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
Hemp
and its Market and Industry in the PRC
Hemp
was originated from the middle and lower reaches of Yellow River with over eight-thousand years’ planting history. The hemp textile
technology in our country has matured as early as two thousand years in the Western Han Dynasty. “Plain Color Zen Clothing”,
coming up from Han Tombs at Mawangdui and other hemp textile products have become the milestone in the developing history of hemp textile
technology.
Hemp,
also known as Huoma, Xianma, Kuima, Hanma, Dama. Species that containing less than 0.3% of tetrahydrocannabinol (THC) is considered as
Hemp, and more than 0.3% is considered as Marijuana and Hashish internationally. Hemp is a kind of economic plant with special effects
and can be grown in large areas in all parts of China. It has low requirements for soil and climate and can grow on relatively barren
land. Planting hemp has become a way to get rich and get out of poverty in some poor areas.
Hemp
is full of treasures. The skin, stem, seed, root, leaf and flower of hemp have utility value which can be widely applied in the fields
of textile, paper-making, food, medicine, construction, transportation, national defense and military industry and so on. As a kind of
traditional economic plant, hemp fiber has the functions of moisture absorption and perspiration, natural antimicrobial health care,
good quality of adsorption, excellent quality of anti-UV and unique wave adsorption and sound attenuation. The stem of hemp has high
degree of lignification and can be used to produce high value biologic additives, viscose fibers, top grade cigarette paper and wooden
ceramics and so on. The leaf and flower of hemp can be used to produce various kinds of health products and the seed of hemp can be used
to manufacture top grade edible oil, essential oil and hemp protein.
A
hemp plant contains over 400 kinds of chemical components and can be divided into cannabinoid and non-cannabinoid compounds. Cannabinol
(CBN) in cannabinoid has the functions of anti-inflammatory, analgesia, anti-convulsion and suppressing female hormone secretion. Cannabidiol
(CBD) has the functions of anti-inflammatory, sterilization, analgesia, antianxiety, antipsychotic, antioxidation, neural protection,
reducing enterocinesia and improving learning and memory ability.
Hemp
is the major high-yielding crop of making traditional fiber products in China. It is a kind of high value-added economic crop with a
wide range of uses and multi-purpose crop with market prospects that provides fiber, hemp stem and seed. Hemp has many unique natural
characteristics, especially its environmental benefits and its natural versatility, which is a valuable kind of crop for ecological economy.
Textiles,
clothing, military industry, construction materials, food, medicines, health supplements, cosmetics and skin care products of the downstream
of hemp industry in China are relatively well-developed. The bottleneck that restricts the development of downstream industries is that
the cultivation of hemp in the upstream has long been the planting mode of scattered peasant households, and has not formed large-scale
industrialized cultivation and local initial processing capacity.
After
years of development, Chinese consumers have gradually rationalized their attitude and behavior in the consumption of health care products,
paying more attention to the safety and efficacy of health care products. At the same time, the government has gradually improved the
laws and regulations of the health care industry and tightened its supervision.
The
rejuvenation of the modern industry of hemp resulted from the major breakthrough in research and mass production of hemp. Firstly, cultivate
new varieties of hemp with low activity of anesthetic in agricultural scientific research. The main component of these varieties of anesthetics
is THC and the content of THC is controlled at 0.3% which approximates to non-toxicity. This has led to a renewed understanding and affirmation
of the industrial use of hemp, and made the cultivation of hemp mechanize, effectively contributing to the development of hemp industry.
In
order to meet the needs of the development of domestic and foreign market, China has successively reactivated the hemp industry projects
in Yunnan, Heilongjiang, Shandong, Shanxi, Anhui and Hubei provinces to set up factories and scientific research institutes to carry
out research and development of various products. The natural functional advantages of its related products are favored by consumers
at home and abroad. The products are exported to countries such as the United States, Canada, Australia, Japan, and Korea. Currently,
related products of hemp have also become an export-oriented pillar industry in China.
At
present, on the basis of solving scientific and technological problems of deep degumming of hemp, extraction of fine fiber, extraction
of CBD, purification of hemp seed oil, extraction of essential oil of hemp, extraction of hemp protein, biocomposites, fiber reinforced
composite materials, carry out pilot plant test and industrialized mass production of related products of hemp, and gradually develop
the deep comprehensive utilization of hemp products, demonstrating the strength of deep processing in the hemp industry.
Competition
in the Healthcare Products Industry
We
believe our competitors are:
Harbin
DaZhong Pharmaceutical Co., Ltd. (Located in Harbin, Heilongjiang Province);
Tsinghua
Unisplendour Corporation Limited (Located in Weihai City, Shandong Province);
Heilongjiang
Tianlong Pharmaceuticals Co., Ltd (Located in Heilongjiang Province);
HPGC
Renmintongtai Pharmaceuticals Co., Ltd (Located in Heilongjiang Province); and
Yunnan
Hansu Biotechnology Co., Ltd. (Located in Yunnan Province).
Our
Competitive Advantages and Strategy
We
believe that we have the following advantages over our competitors:
| ● | We
have more categories of products and a diversified production line; |
| ● | We
have a strong and effective research and development team; |
| ● | We
are a self-owned enterprise, and have the support of the local government; and |
| ● | We
have a geographical advantage being located in Heilongjiang Province, the center of the healthcare industry in the PRC. |
Sales
and Marketing
We
plan to open more chain stores throughout the PRC. Customers of our stores would be able to enjoy discounts on the price of our products
and services. After establishing a sufficient number of stores, we plan to develop a 24-hour delivery system for our B2C e-business.
Intellectual
Property
We
received a patent (200610010394.4) for our “Qunle” brand Sailuozhi soft capsule from the National Bureau of Intellectual
Property. We had initially applied for and used the trade name of “RunChao” soft capsules, but the trade name was changed
to “Qunle”, and the change was approved by the National Bureau of Intellectual Property. The expiration date for “Qunle”
is May 12, 2030.
Pursuant
to a Technology Transfer Agreement dated October 12, 2007 (“Kindlink Technology Transfer Agreement”), we purchased, for a
total of RMB350,000, the technology, manufacturing, and trademark rights to the health product known as “Kindlink” brand
propolis and black ant capsule made from propolis, black ant, acanthopanax, astragalus root from Jindelikang. The change of the ownership
was approved by the NMPA. This product is consumed to boost one’s immunity. The certification number issued by the NMPA on August
20, 2004, to permit the manufacture of the product is GuoShiJianZi G20040906. We have no continuing obligations under the Kindlink Technology
Transfer Agreement.
As
of the date of this report, we have registered the following 14 trademarks(1):
Trademark |
|
Certificate No. |
|
Category |
|
Registrant |
|
Valid Term |
“Qunle” |
|
3896026 |
|
No.5:
Food preparations adapted for medical purposes; Albuminous milk; Dietetic beverages adapted for medical purposes; Milk sugar; Diabetic
bread; Albuminous foodstuffs for medical purposes; Food for babies; Dietetic substances adapted for medical use; Nutritional additives
for medical purposes |
|
Humankind |
|
7/7/2016
to 7/6/2026 |
|
|
|
|
|
|
|
|
|
“Wangzu” |
|
4857905 |
|
No.30:
Molasses for food; Honey; pollen healthy grease; tortoise tuchahoe paste; breed columbine extract; helix alga; non-medical nutrition
liquid; non-medical nutrition powder; non-medical nutrition capsule; sugar candy bird’s nest |
|
Humankind |
|
5/14/2018
to 5/13/2028 |
|
|
|
|
|
|
|
|
|
“Kindlink” |
|
3236981 |
|
No.5:
Food preparations adapted for medical purposes; Dietetic substances adapted for medical use |
|
Humankind |
|
12/7/2013
to 12/06/2023 |
|
|
|
|
|
|
|
|
|
“Huimeijia” |
|
5280303 |
|
No.5:
Medicine for human consumption; Medical nutrition capsule; Fibres (Edible plant) [non-nutritive]; Injection; Raw material drug; Troche;
suppository; Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted
for medical use |
|
Humankind |
|
7/21/2019
to 7/20/2029 |
|
|
|
|
|
|
|
|
|
“Huide” |
|
5280304 |
|
No.5:
Medicines for human consumption; Medical nutrition capsule; Fibres (Edible plant) [non-nutritive]; Injection; Raw material drug;
Troche; suppository; Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances
adapted for medical use |
|
Humankind |
|
7/21/2019
to 7/20/2029 |
“KDLK” |
|
3230404 |
|
No.5: Food
preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted for medical use
|
|
Humankind |
|
9/28/2013 to
9/27/2023 |
|
|
|
|
|
|
|
|
|
“dr.xiao” |
|
5176731 |
|
No.5: Disinfectant; Medicines
for veterinary purposes; Insecticide; Sanitary napkin; Medicine health bag; Dental lacquer |
|
Humankind |
|
8/14/2019 to 8/13/2029 |
|
|
|
|
|
|
|
|
|
“dr.xiao” |
|
1610828 |
|
No.30: non-medical nutrition
liquid; non-medical nutrition cream; non-medical nutrition powder; Honey; non-medical nutrition capsule; non-medical nutrition gum;
Candy for food; Spirulina (non-medical nutrient); Candy; Pollen healthy grease |
|
Humankind |
|
7/28/2021 to 7/27/2031 |
|
|
|
|
|
|
|
|
|
“DaLeNing” |
|
5053772 |
|
No.5: Medicine for human;
Chinese patent drugs; Suppository; Tincture; Water aqua; Paste; Liniment; Medical lotion; Patch; Chemical pharmaceuticals preparations
|
|
HLJ Huimeijia |
|
5/7/2019 to 5/6/2029 |
|
|
|
|
|
|
|
|
|
“Xuedu” |
|
5053657 |
|
No.5: Medicine for human;
Chinese patent drugs; Suppository; Tincture; Water aqua; Paste; Liniment; Medical lotion; Patch; Chemical pharmaceuticals preparations
|
|
HLJ Huimeijia |
|
5/7/2019 to 5/6/2029 |
|
|
|
|
|
|
|
|
|
“Xuedu” with an image |
|
642099 |
|
No.5: Paste |
|
HLJ Huimeijia |
|
5/21/2013 to 5/20/2023 |
|
|
|
|
|
|
|
|
|
“Tai Yan Li” |
|
10014001 |
|
No.30: Honey, spirulina (non-medical),
non-medical nutrient solution, non-medical nutrient lotion, non-medical nutrient powder, non-medical nutrient capsule, pastry, cereal,
flour product. |
|
Humankind |
|
11/28/2012 to 11/27/2022 |
|
|
|
|
|
|
|
|
|
“Tai Yan Li” |
|
10013969 |
|
No.3: Cleanser lotion,
soup, anti -bacterial hand soup, cleanser, cosmetics, conditioning gel, polish, essential oil. |
|
Humankind |
|
11/28/2012 to 11/27/2022 |
|
|
|
|
|
|
|
|
|
“Luo Qian’ |
|
8358643 |
|
No.3: essential oil, fragrance
essential oil, nourishing essential oil, cosmetic mask, cosmetic tools, cosmetics, cosmetic cleanser, perfume, weight-losing cosmetics,
banishing essence. |
|
Humankind |
|
6/14/2021 to 6/13/2031 |
(1) |
The trademarks listed here
have been spelt in Pinyin for the U.S. readers’ convenience. The original trademarks are in Chinese characters. |
We
have the right to use the following patents under the approval of National Bureau of Intellectual Property:
|
|
|
|
|
|
|
|
|
|
Patent |
Categories |
|
Name |
|
Inventor/Designer |
|
Patent
No. |
|
Duration |
|
Owner |
Invention Patent |
|
Runchao Soft Capsule and Its Manufacturing Method |
|
Xin Sun |
|
ZL200610010394.4 |
|
August 10, 2006-
August 9, 2026 |
|
Xin Sun* |
|
|
|
|
|
|
|
|
|
|
|
Utility Patent |
|
Heating System in Compression Coaster with Coating
Wheels |
|
ZhengJiang Huang |
|
ZL201220485432.2 |
|
September 22, 2012- September 21, 2022 |
|
HLJ Huimeijia |
|
|
|
|
|
|
|
|
|
|
|
Design Patent |
|
Packing Box for Pain- relieving Ointment |
|
Jianjun Wang |
|
ZL201230448116.3 |
|
September 19, 2012- September 18, 2022 |
|
HLJ Huimeijia |
|
|
|
|
|
|
|
|
|
|
|
Design Patent |
|
Packing Box for Nasal Mucus-releiving Ointment |
|
Jianjun Wang |
|
ZL201230448676.9 |
|
September 19, 2012- September 18, 2022 |
|
HLJ Huimeijia |
|
|
|
|
|
|
|
|
|
|
|
Design Patent |
|
Packing Box for Gou Pi Plaster |
|
Jianjun Wang |
|
ZL201230447952.X |
|
September 19, 2012- September 18, 2022 |
|
HLJ Huimeijia |
|
|
|
|
|
|
|
|
|
|
|
Design Patent |
|
Packing Box for Tendons and Bones Strengthening Musk
Ointment |
|
Jianjun Wang |
|
ZL201230448670.1 |
|
September 19, 2012- September 18, 2022 |
|
HLJ Huimeijia |
|
|
|
|
|
|
|
|
|
|
|
Design Patent |
|
Packing Box for Pain- relieving Musk Ointment |
|
Jianjun Wang |
|
ZL201230448010.3 |
|
September 19, 2012- September 18, 2022 |
|
HLJ Huimeijia |
* |
Mr. Sun verbally authorized
the Company the right to use the patent. |
The
following is a list of our patent applications:
The
applicant of all the following patents is Humankind, with their inventor being Mr. Xin Sun. In March 2017, we submitted the below patent
applications which are currently in the reviewing process and pending for approval.
Serial No. |
|
Name |
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Application |
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Technology
Field |
1 |
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Cannabidiol (CBD) Cataplasmata |
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Cannabidiol
(CBD) is used for relieving muscle pain and its preparation method. |
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The invention
belongs to the research and application field of industrial hemp and relates to a kind of cataplasmata, in particular to Cannabidiol
(CBD) which is used for relieving muscle pain and its preparation method. |
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2 |
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Cannabidiol (CBD) Suspension |
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Cannabidiol (CBD) Suspension
is used for treating arthritis and its preparation method. |
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The invention relates to
the field of pharmaceutical preparations, in particular to a kind of Cannabidiol (CBD) Suspension which is used for treating arthritis
and its preparation method. |
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3 |
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Cannabidiol (CBD) Gel |
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Cannabidiol (CBD) Gel has
the effect of relieving nervous headache and its preparation method. |
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The invention relates to
gel preparations for medicine, in particular to a kind of Cannabidiol (CBD) Gel which has the effect of relieving nervous headache
and its preparation method. |
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4 |
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Cannabidiol (CBD) Paste |
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Cannabidiol (CBD) Paste
has the effect of relieving swelling and pain and its preparation method. |
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The invention relates to
the field of medicine, in particular to a kind of Cannabidiol (CBD) Paste which has the effect of relieving swelling and pain and
its preparation method. |
5 |
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Cannabidiol (CBD) Soft Capsule |
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Cannabidiol
(CBD) Soft Capsule has the effect of improving diabetes and its preparation method. |
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The invention
relates to the field of soft capsule, in particular to a kind of Cannabidiol (CBD) Soft Capsule which has the effect of improving
diabetes and its preparation method. |
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6 |
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Cannabidiol (CBD) Suppository |
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Cannabidiol (CBD) Suppository
has the effect of heat sterilization and its preparation method. |
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The invention relates to
the field of medicine, in particular to a kind of Cannabidiol (CBD) Suppository which has the effect of heat sterilization and its
preparation method. |
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7 |
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Cannabidiol (CBD) Plaster |
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Cannabidiol (CBD) Rubber
Plaster has the effect of treating old bone disease and its preparation method. |
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The invention relates to
the field of medical plaster, in particular to a kind of Cannabidiol (CBD) Rubber Plaster which has the effect of treating old bone
disease and its preparation method. |
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8 |
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Cannabidiol (CBD) Rubber Plaster |
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Cannabidiol (CBD) Rubber
Plaster has the effect of dispelling wind and eliminating dampness and its preparation method. |
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The invention relates to
the field of medical plaster, in particular to a kind of Cannabidiol (CBD) Rubber Plaster which has the effect of dispelling wind
and eliminating dampness and its preparation method. |
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9 |
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Cannabidiol (CBD) Liquid Pharmaceutical Preparations |
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Cannabidiol (CBD) Liquid
Pharmaceutical Preparations has the anti-anxiety effect and its preparation method. |
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The invention relates to
the field of liquid pharmaceutical preparations, in particular to a kind of Cannabidiol (CBD) Liquid Pharmaceutical Preparations
which has the anti-anxiety effect and its preparation method. |
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10 |
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Moisturizing Cream with Hemp Seed Oil |
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Moisturizing Cream with
Hemp Seed Oil and its preparation method. |
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The invention relates to
the field of cosmetics, in particular to a kind of Moisturizing Cream which contains hemp seed oil and its preparation method. |
The
laws governing our business are as follows:
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● |
Drug administration law of the PRC enacted August 27,
2019 |
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Healthcare registration and administration law, enacted
January 7, 2005 |
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Measures for the Administration of Pharmaceutical Trade
License, enacted January 4, 2004 |
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Measures for the Supervision Over and Administration
of Pharmaceutical Production, enacted May 8, 2004 |
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Food Safety Law of the PRC, enacted June 1, 2009 |
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Regulation on the Implementation of the Food Safety
Law of the PRC, enacted July 20, 2009 |
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Regional regulation: Heilongjiang Regional Medicinal Materials Resource Protection Bylaw, enacted January 8, 2005 |
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Good Manufacturing Practice (GMP) Amendment, enacted January 17, 2011 |
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Hemp Industry 3-year Special Action Plan of Heilongjiang Province (2018-2020) and |
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Hemp Legislation of Heilongjiang Province in May 2017. |
In the PRC, a Good Manufacturing Practice Certification
(“GMP Certification”) is required for companies that produce medical drugs and health supplements. It is also required to
market our medical drugs and health supplements. According to the Administrative Rules of Drug Manufacturing and Certification issued
by the NMPA of the PRC on September 7, 2005, the NMPA is responsible for the review and issuance of GMP Certification. To obtain a GMP
Certification, a company shall submit its application; the NMPA will then conduct a technical review of the application materials; if
such company passes the technical review, the NMPA will inspect the manufacturing site. The NMPA also conducts follow-up inspections on
the manufacturing site. After the issuance of the GMP Certification, the NMPA may inspect the manufacturing site from time to time. However,
instead of issuing GMP, the NMPA now issues SC Permit to food manufacturers in China, allowing them to manufacture and sell health products.
The GMP Certifications of our wholly owned subsidiaries, Humankind, HLJ Huimeijia, are valid through February 14, 2019 and December 31,
2015, respectively. For the GMP Certificate of HLJ Huimeijia, the Company applied for a new certificate, which was obtained on April 25,
2018. Since obtaining the GMP Certification, we have been able to manufacture and market our products without further governmental approval.
As Humankind is in the business of manufacturing and selling health products, it is considered as a food manufacturer in China. Humankind
received its SC Permit on July 26, 2018, which will expire on September 12, 2021.The Company has applied for extension which is expect
to be approved at the end of October 2021. On December 1, 2019 the newly revised Drug Administration Law (the “New Law”) came
into effect. One of the major amendments is the cancellation of GMP certification. The New Law eliminated the requirement that drug administration
authorities shall assess drug manufacture enterprises and drug trading enterprises, and issue assessment certificates. Instead, it requires
that drug manufacturing enterprises and drug trading enterprises establish and improve the quality management systems of manufacture and
trade of drugs, and ensure that the process of manufacturing and trading of drugs always meets all legal requirements. This means a stricter
form of supervision is implemented comparing to the prior GMP certificates system and our production lines are subject pilot inspection
under the New Law.
PCAOB and Auditor’s Regulation
On April 21, 2020, SEC released a joint statement
highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China.
The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China
and higher risks of fraud in emerging markets. On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering
size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the
qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria
to an applicant or listed company based on the qualifications of the Company’s auditors.
On May 20, 2020, the U.S. Senate passed the
Holding Foreign Companies Accountable Act (the “HFCAA”) requiring a foreign company to certify it is not owned or controlled
by a foreign government if the PCAOB is unable to audit specified reports because the Company uses a foreign auditor not subject to PCAOB
inspection. If the PCAOB is unable to inspect the Company’s auditors for three consecutive years, the issuer’s securities
are prohibited to trade on a national securities exchange or in the over the counter trading market in the U.S. On December 18, 2020,
the HFCAA was signed into law. The HFCAA has since then been subject to amendments by the U.S. Congress and interpretations and rulemaking
by the SEC.
On June 22, 2021, the U.S. Senate passed the
Accelerating Holding Foreign Companies Accountable Act, which proposes to reduce the period of time for foreign companies to comply with
PCAOB audits from three to two consecutive years, thus reducing the time period before the securities of such foreign companies may be
prohibited from trading or delisted. On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was signed into
law.
On December 16, 2021, PCAOB announced the
PCAOB HFCAA determinations relating to the PCAOB’s inability to inspect or investigate completely registered public accounting
firms headquartered in mainland China of the PRC or Hong Kong, a Special Administrative Region and dependency of the PRC, because of
a position taken by one or more authorities in the PRC or Hong Kong. The inability of the PCAOB to conduct inspections of auditors in
China made it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures
as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors
in issuers operating in China to lose confidence in such issuers’ procedures and reported financial information and the quality
of financial statements.
Our auditor, Centurion ZD CPA & Co., the
independent registered public accounting firm that issues the audit report included herein, as an auditor of companies that are traded
publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB
conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Our auditor is headquartered
in Hong Kong, and was listed as an account firm subject to the Hong Kong determination in the PCAOB’s HFCAA Determination Report
dated December 2021 (the “PCAOB 2021 Determinations”), as an accounting firm the PCAOB is unable to inspect or investigate
completely.
On August 26, 2022, the PCAOB announced and
signed a Statement of Protocol (the “Protocol”) with the China Securities Regulatory Commission and the Ministry of Finance
of the People’s Republic of China (together, the “PRC Authorities”). The Protocol provides the PCAOB with: (1) sole
discretion to select the firms, audit engagements and potential violations it inspects and investigates, without any involvement of Chinese
authorities; (2) procedures for PCAOB inspectors and investigators to view complete audit work papers with all information included and
for the PCAOB to retain information as needed; (3) direct access to interview and take testimony from all personnel associated with the
audits the PCAOB inspects or investigates.
On October 21,
2022, the SEC issued its updated “Conclusive list of
issuers identified under the HFCAA” (the “List”) indicating that those companies are now formally subject to the trading
prohibition provisions if they remain on the List for two consecutive years, which we are included. As of the date of this transition
report, more than 170 public companies have been listed in as issuers identified under the AHFCAA, including us. As we have been conclusively
identified on October 21, 2022, if we continue to be so identified on the list until October 21, 2024, the SEC will be required under
the HFCAA to prohibit the trading of our securities on a national securities exchange and in the over-the-counter market.
On
December 15, 2022, the PCAOB announced in its 2022 HFCAA Determination Report (the “2022 Report”) its determination that
the PCAOB was able to secure complete access to inspect and investigate audit firms in the People’s Republic of China (PRC), and
the PCAOB Board voted to vacate previous determinations to the contrary. According to the 2022 Report, this determination was reached
after the PCAOB had thoroughly tested compliance with every aspect of the Protocol necessary to determine complete access, including
on-site inspections and investigations in a manner fully consistent with the PCAOB’s methodology and approach in the U.S. and globally.
According to the 2022 Report, the PRC Authorities had fully assisted and cooperated with the PCAOB in carrying out the inspections and
investigations according to the Protocol, and have agreed to continue to assist the PCAOB’s investigations and inspections in the
future. Thus the PCAOB has vacated the PCAOB 2021 Determinations, including the determination that the PCAOB is unable to inspect or
investigate completely our auditor. The PCAOB may reassess its determinations and issue new determinations consistent with the HFCAA
at any time. We cannot assure you that the PRC Authorities will continue to fully assist the PCAOB in the future. The PRC Authorities
may, in the future, prevent or hinder the PCAOB from continuing to inspect or investigate, either partially or completely, accounting
firms headquartered in mainland China or Hong Kong, in which case we may get delisted from the OTC Market if PCAOB determines that it
is not able to fully inspect and investigate our auditors for two consecutive years if we do not in time engage an alternative auditor
fully subject to PCAOB inspection and investigation.
Further developments related to the HFCAA
could add uncertainties to our offering. Although PCAOB has now temporarily confirm the capability to inspect the auditors firms in PRC,
and thus the AHFCAA and the List will not affect our listing, we cannot assure you that will always be the case and what further actions
the SEC, the PCAOB or the stock exchanges will take to address these issues and what impact such actions will have on U.S. companies
that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange
or over-the-counter stock market). In addition, any additional actions, proceedings, or new rules resulting from these efforts to increase
U.S. regulatory access to audit information could create uncertainty for investors, the market price of our ordinary shares could be
adversely affected, and trading of our securities could become prohibited if we or our auditor are unable to meet the PCAOB inspection
requirement. Such a trading prohibitions would substantially impair your ability to sell or purchase our ordinary shares when you wish
to do so, and would have negative impacts on trading our ordinary shares, including decrease in trading price, increase in price volatility,
decrease in trading volume and liquidity, and loss of trading venues.
Enforceability
China Health US is a Delaware holding company
with its operation in PRC conducted by its PRC subsidiaries, with substantially all of the Company’s assets located there. In addition,
all Company’s senior executive officers, all reside within China for a significant portion of the time and most are PRC nationals.
As a result, it may be difficult for the shareholders to effect service of process upon China Health US or those persons inside China.
Shareholder claims that are common in the
United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality
in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations
or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory
cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and
administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient
in the absence of mutual and practical cooperation mechanism.
As China does not have treaties providing
for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries and regions, recognition
and enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding
arbitration provision may be difficult or impossible. As a result, it may be difficult to enforce against us or them judgments obtained
in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States
or any state in the United States. It may also be difficult for a shareholder to enforce judgments obtained in U.S. courts based on the
civil liability provisions of the U.S. federal securities laws against us and these persons located in China.
Employees
As of June 30, 2022, we have 45 full-time employees
including 6 officers, 9 administrators, 13 workers, 7 technicians, 5 marketing personals and 5 accountants. Besides, we have 12 sales
persons as part-time employees. We believe that we are in compliance with local prevailing wage, contractor licensing and insurance regulations,
and have good relations with our employees.