CHHE China Health Industries Holdings Inc (QB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10K

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2023

or

☐ 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)

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.0001 par value

Title of Class

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has 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, 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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting and non-voting common stock of the issuer held by non-affiliates as of December 31, 2022 was approximately $7,655,533 (45,032,549 shares of common stock held by non-affiliates) based upon the closing price of the common stock on such date.

As of November 10, 2023, there were 65,539,737 shares of common stock, par value $0.0001 issued and outstanding. 

Table of Contents

PART I

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.

On June 27, 2023 (the “Signing Date”), Harbin Humankind Biology Technology Co., Limited (“Humankind”), a wholly owned subsidiary of China Health Industries Holdings, Inc. (“China Health”), a corporation incorporated under the laws of the State of Delaware, entered into certain equity transfer agreements (collectively, the “Agreements”) with Mr. Xin Sun and Mr. Kai Sun (collectively, the “Sellers”). Pursuant to the Agreements, the Sellers agreed to transfer to Humankind 99% and 1% of the equity interests of Heilongjiang HempCan Pharmaceuticals Co., Ltd. (“HempCan”), for a consideration of RMB292,050,000 (approximately $40,275,537) and RMB2,950,000 (approximately $406,824) respectively, totaling RMB295 million (approximately $40,682,360) (collectively, the “Purchase Prices”). The Purchase Prices shall be fully paid to Sellers within 15 business days after the Signing Date, and the Sellers shall complete certain registration procedures, such as change of equity ownership and change of business registration within 15 business days after full Purchase Prices are received. If Humankind is late in paying the Purchase Prices, a 0.1% per day late penalty on the amount of Purchase Prices that is paid late shall be paid to the Sellers. Mr. Xin Sun is China Health’s Chairman, sole director and sole executive officer and Mr. Kai Sun is Mr. Xin Sun’s younger brother.

China Health US, China Health HK, Humankind and HLJ Huimeijia are collectively referred herein to as the “Company.”

As of June 30, 2023, 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 10 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. On December 1, 2019, NMPA announced that it will no longer issue GMP certificate for any pharmaceutical companies. However, NMPA will carry out conformity inspection to do compliance testing, as well as flight check (unannounced inspection) for all pharmaceutical companies. 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.

For the fiscal year 2023, we sell our products to end customers through our own sales personnel as well as our sales agents, operating primarily in Heilongjiang Province, 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 2023, 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 in the first half of the fiscal year 2023, we expect the CBD extractive project to be completed by the end of calendar year of 2024 (“Transformation”). We do not currently sell our products online, but we expect to do so in the future.

Cash Transfer

For the years ended June 30, 2023 and 2022, 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 Seed Beer, 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 Seed Beer, Hemp Oil and Hemp Seed accounted for 100% and nil of the total revenues for the fiscal year of 2023 and 2022, respectively.

(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:

The major suppliers of raw materials for our products who exceeded 10% of our total purchases in the fiscal years 2023 and 2022 are the following:

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:

Distribution 

Most of our products are sold to sales agents. In the fiscal year of 2022, because of COVID-19 influence and the Transformation, we did not sell our products to sales agents. In the fiscal year of 2023, our sales network covered Heilongjiang provinces or cities.

E-business 

We are in the process of building the infrastructure to conduct our business over the internet. A B2C e-business call and sales center has been established and will become an integral part of our distribution channel in the future. We have employed graduates from Tsinghua University, Harbin Industry University and Harbin Engineering University to develop the ERP (Enterprise Resource Planning), CRM (Customer Relationship Management) and Office Automation software (“OA Software”) for our e-business. The OA Software has been used in our daily operation. The Company plans to sell its products via internet in the fiscal year of 2024.

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:

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 (RMB50,000,000).

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:

Marketing:

Adopt an effective marketing strategy to:

Product Distribution:

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 February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), which became effective on March 31, 2023. The Trial Measures 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:

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:

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⁾:

We have the right to use the following patents under the approval of National Bureau of Intellectual Property:

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.

The laws governing our business are as follows:

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 Consolidated Appropriations Act, 2023 (the “CAA”), which the AHFCAA forms a part, was signed into law, and it officially reduced the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, thus, would reduce the time before an applicable issuer’s securities may be prohibited from trading or delisted.

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, 2023, we have 32 full-time employees including 6 officers, 5 administrators, 12 workers, 4 technicians, and 5 accountants. Besides, we have 2 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. 

Item 1A. Risk Factors.

We are a smaller reporting company and therefore this item is not applicable to us.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 1C. Cybersecurity

Not applicable.

Item 2. Properties.

There is no private land ownership in PRC. Enterprises and individuals can pay the government a fee to obtain a right to use a piece of land for commercial purpose or residential purpose for an initial period of 50 years or 70 years, respectively. The land use right can be sold, purchased, and exchanged in the market. The land use right of a successor owner will be reduced by the amount of time consumed by the predecessor owner.

We manufacture our products on a plot of land located in Jin Xing Industrial Park, Songbei District, Harbin. On June 7, 2004, the Company entered into a Land Use Purchase Contract with the local government, pursuant to which the Company agreed to purchase the right to use a piece of land, approximately 8 acres (32,000 square meters), located in Harbin County, Heilongjiang Province for commercial purposes for a fifty-year period from June 7, 2004 through June 6, 2054, for $637,261 (RMB 5,248,000). The Company fully paid to the government the consideration for the land use right on June 13, 2004. The Department of Housing and Urban Development of Harbin City approved this transaction. The Company is in the process of applying for the title certificate from the local government. Due to certain re-zoning conducted by the local government, the estimate time to receive the title certificate is uncertain. The Company is striving to accelerate the process. The manufacturing facility on the land is 4,000 square meters and there are five production lines which are sufficient for our operation. We package our products in bottles, plastic containers and aluminum foil bags.

Since we acquired HLJ Huimeijia on November 22, 2013, we also manufacture our medicines and drugs using HLJ Huimeijia’s land, approximately 43,350 square meters, located in Hai-lin Economic Development Zone, Mudanjiang City. The manufacturing facilities occupy approximately 5,710 square meters. We plan to build new manufacturing facilities on the land. The expected construction cost is approximately $7,520,000 (RMB 50,000,000).

Item 3. Legal Proceedings.

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

Item 4. Mine Safety Disclosures.

This item is not applicable to us.

PART II 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information 

Our common stock is quoted over-the-counter on the OTC Markets QB Tier under the ticker “CHHE” and the market for the stock has been relatively inactive. The quotations on the OTC Markets reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

As of November 10, 2023, we had approximately 502 shareholders of record of our common stock, such number of holders does not include street name holders who hold shares by brokerage firms. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

Dividends 

We have not paid dividends on our common stock and do not anticipate 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.

Securities Authorized for Issuance Under Equity Compensation Plans

On March 27, 2015 the Board of Directors (the “Board”) adopted the Company’s 2015 Equity Incentive Plan (the “Plan”), which became effective as of such date. The total number of authorized shares under the Plan is 6,000,000 shares of common stock.

The following table summarizes the number of shares of our common stock authorized for issuance under our Plan as of June 30, 2023.

Equity Compensation Plan Information

Registrar and Stock Transfer Agent 

Our stock transfer agent is Direct Transfer LLC at 1981 Murray Holladay Road, Suite 100, Salt Lake City, UT 84117. Their telephone number is (801) 272-9294, and their fax number is (801) 277-3147.

Shares Eligible for Future Sale 

There is no active trading market for our common stock. Future sales of substantial amounts of our common stock in the trading market could adversely affect market prices.

Penny Stock Regulations 

Our shares of common stock are subject to the “penny stock” rules of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and various rules thereunder. In general terms, “penny stock” is defined as any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, issued by a registered investment company, and excluded from the definition on the basis of price (at least $5.00 per share), or based on the issuer’s net tangible assets or revenues. In the last case, the issuer’s net tangible assets must exceed $3,000,000 if in continuous operation for at least three years or $5,000,000 if in operation for less than three years or the issuer’s average revenues for each of the past three years must exceed $6,000,000.

Trading in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock, to the extent it is penny stock, and may affect the ability of shareholders to sell their shares.

Recent Sale of Unregistered Securities 

None.

Repurchase of Equity Securities 

None.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD LOOKING STATEMENTS

We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under this caption as well as under captions elsewhere in this document, are forward-looking statements. In some cases, these statements are identifiable through the use of words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, “project”, “target”, “can”, “could”, “may”, “should”, “will”, “would”, and similar expressions. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the SEC should be considered in evaluating forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. You are cautioned not to place undue reliance on such forward-looking statements, which reflect our view only as of the date of this report.

Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the following:

Except as required by applicable laws, regulations, or rules, we do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this report.

Except as otherwise indicated by the context, references in this report to “we”, “us”, “our”, “the Registrant”, “our Company”, or “the Company” are to China Health Industries Holdings, Inc., a Delaware corporation, China Health Industries Holdings Limited, a limited liability company incorporated under the laws of Hong Kong, its wholly owned subsidiary in China, Harbin Humankind Biology Technology Co. Limited (“Humankind”), and indirect wholly owned subsidiary, Heilongjiang Huimeijia Pharmaceutical Co., Ltd. (“HLJ Huimeijia”). Unless the context otherwise requires, all references to (i) the “PRC” and “China” are to the People’s Republic of China; (ii) “U.S. dollar,” “$” and “US$” are to United States dollars; (iii) “RMB” are to Renminbi Yuan of China; (iv) “Securities Act” are to the Securities Act of 1933, as amended; and (v) “Exchange Act” are to the Securities Exchange Act of 1934, as amended.

Business Overview

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

The Company owns a GMP-certified plant and production facilities and has the capacity to produce 21 different NMPA-approved medicines, 14 NMPA-approved health supplement products and 10 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. On December 1, 2019, NMPA announced that it will no longer issue GMP certificate for any pharmaceutical companies. However, NMPA will carry out conformity inspection to do compliance testing, as well as flight check (unannounced inspection) for all pharmaceutical companies. HLJ Huimeijia engages in the manufacture and distribution of tincture, ointments, rubber paste, including hormones, topical solution, suppositories, enemas, oral liquids, and liniment, including traditional Chinese medicine extractions. HLJ Huimeijia’s predecessor was Heilongjiang Xue Du Pharmaceutical Co., Ltd., which established brand recognition in the market through its supply of high-quality drug products. HLJ Huimeijia is a “high and new technology” enterprise that provides the most comprehensive types of topical medical products in Heilongjiang Province, a northeastern province of China.

We have developed the following products that are derived from hemp and obtained business license to manufacture and sell these products. We have begun to sell these products since May 2018. Hemp Seed Beer, 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 Seed Beer, Hemp Oil and Hemp Seed accounted for 100% and nil of the total revenues for the fiscal year of 2023 and 2022, respectively.

We sell most of our products to sales agents, who are our customers. The sales agents sell the products to the end users.

2023 Outlook

Overall, we anticipate our total revenues for the year ended June 30, 2024 to reach to $5.5 million, with growth in all categories of our product sales, including the anticipated revenue from Humankind for approximately $0.5 million, from HLJ Huimeijia for approximately $1.5 million and from HempCan for approximately $3.5 million. The gross profit margin for the year ended June 30, 2024 is expected to be approximately 40%, and we estimate our overall net profit margin for the year ended June 30, 2024 to be approximately 15%. There is, however, no assurance that we will reach these projections.

Results of Operations

The following table summarizes the top lines of the results of our operations for the years ended June 30, 2023 and 2022, respectively:

Revenue

Total revenues of the Company increased by $111,312 or 41,689.9%, for the year ended June 30, 2023 as compared to the year ended June 30, 2022. The increase in revenues was primarily due to an increase of $111,579 or 100.0% in Humankind’s revenues for the year ended June 30, 2023 as compared to the year ended June 30, 2022.The increase in Humankind’s sales revenues was primarily derived from selling a new product, Hemp Seed Beer and selling raw material Hemp Seed.

Our total cost of sales increased by $109,611 or 6,270.7% for the year ended June 30, 2023 as compared to the year ended June 30, 2022. The increase in the overall cost of sales was attributable to an increase of $111,359 or 100.0% in Humankind’s cost of sales in 2023 as compared to the year ended June 30, 2022. The increase in Humankind’s sales revenues was primarily derived from cost on selling a new product, Hemp Seed Beer and selling raw material Hemp Seed.

Our gross profit increased by $1,701 from gross loss $1,481 for the year ended June 30, 2022 to $220 for the year ended June 30, 2023. This change was consistent with the change of sales and costs in Humankind. This growth mainly comes from the sales of the new product hemp seed beer and the raw material hemp seed.

Sales by Product Line

The following table summarizes a breakdown of our sales by major product line for the years ended June 30, 2023 and 2022, respectively:

Operating Expenses

The following table summarizes our operating expenses for the years ended June 30, 2023 and 2022, respectively:

Total operating expenses for the year ended June 30, 2023 increased by $196,379 or 11.9%, as compared to the corresponding period in 2022. The increase in operating expenses was primarily attributable to an increase of $320,070 or 34.2% in selling, general and administrative expenses. The increase in selling, general and administrative expenses was mainly due to an increase in the amount of expired inventory destroyed in 2023 compared to the previous year.

Interest Income and Interest Expenses

Interest income was $113,615 for the year ended June 30, 2023, as compared to $157,860 for the year ended June 30, 2022. This decrease of $44,245, or 28.0%, was primarily due to the decreased average balance of bank deposits compared with the same period of 2022. This decline in bank balances was mainly due to the effects of currency translation difference from RMB to USD during the periods and normal daily operating expenses payment.

Interest expense was $nil for the year ended June 30, 2023, and for the year ended June 30, 2022.

Other Income

Other income was $1,320,791 expense for the year ended June 30, 2023, as compared to $1,139,746 for the year ended June 30, 2022. This increase of $181,045 or 15.9%, was primarily due to revenue earned by the transfer of one of Huimeijia’s production technique. This technique transfer would not affect future production of Huimeijia.

Income Taxes

Income taxes decreased by $2,934, or 100.0%, from $2,934 for the year ended June 30, 2022 to $nil for the year ended June 30, 2023. This decrease of income tax expense incurred in the fiscal year ended June 30, 2023 was primarily due to the decrease of net profits before income taxes.

Net Income (Loss) and Net Income per Share

Net loss after provision for income taxes increased to $408,772, an increase of $54,822 for the year ended June 30, 2023, as compared to net loss of $353,950 for the year ended June 30, 2022. This increase of net loss was mainly because HLJ Huimeijia wrote off a large amount of inventory.

Net loss per share was $0.0062 for the year ended June 30, 2023 and net loss per share was $0.0054 for the year ended June 30, 2022. This increase in net loss per share was primarily a result of the aforementioned increase in net loss.

Liquidity and Capital Resources

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

The following table summarizes our cash and cash equivalents position, our working capital, and our cash flow activity as of the fiscal years ended June 30, 2023 and 2022:

For the years ended June 30:

Cash provided by (used in):

Due to investments in subsidiaries,Cash and cash equivalents decreased by $44,742,753 from $44,789,999 as of June 30, 2022 to $47,246 as of June 30, 2023.

Our working capital as of June 30, 2023 was $34,997,532, compared to working capital of $37,652,693 as of June 30, 2022. This decrease of $2,655,161 or 7.1% was mainly due to the decrease of cash and cash equivalents in the amount of $44,742,753, which offset by the decrease of prepaid investment funds of $40,665,602.

Net cash used in operating activities was $42,272,498 for the year ended June 30, 2023, compared to $2,115,726 for the year ended June 30, 2022. The decrease of $44,388,224 in the net cash provided by operating activities was primarily due to the purchase of subsidiary shares in June 2023.

Net cash used in investing activities was $nil for both years ended June 30, 2023 and 2022.

Net cash provided by financing activities was $nil for both years ended June 30, 2023 and 2022.

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

Related Party Debts

We had related party debts of $5,154,024 as of June 30, 2023, as compared to $6,759,761 as of June 30, 2022, a decrease of $1,605,737 or 23.8%. The amount of related party debts mainly consists of a loan from Mr. Xin Sun, the CEO of the Company. The loan is unsecured and non-interest bearing and has no fixed terms of repayment. There was no written agreement for the loan. See Note 9.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

We regularly evaluate the accounting policies and estimates that we use to make budgetary and financial statement assumptions. A complete summary of these policies is included in Note 2 to our consolidated financial statements, “Significant Accounting Policies”, and is incorporated herein by reference. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not Applicable.

Item 8. Financial Statements and Supplementary Data.

The financial statements required by this item are set forth beginning on page F-1.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of
China Health Industries Holdings, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of China Health Industries Holdings, Inc. and subsidiaries (the “Company”) as of June 30, 2023, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended, and the related notes and Schedule I (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Assentsure PAC

We have served as the Company’s auditors since 2023.

The Bencoolen, Singapore

November 13, 2023

	中正達會計師事務所 Centurion ZD CPA & Co. Certified Public Accountants (Practising)
Unit 1304, 13/F, Two Harbourfront, 22 Tak Fung Street, Hunghom, Hong Kong.
香港 紅磡 德豐街22號 海濱廣場二期 13樓1304室
Tel 電話: (852) 2126 2388        Fax 傳真: (852) 2122 9078
Email 電郵: info@czdcpa.com

Report of Independent Registered Public Accounting Firm

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of China Health Industries Holdings, Inc. and its subsidiaries (the “Company”) as of June 30, 2022 and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2022 and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. 

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

中正達會計師事務所

Centurion ZD CPA & Co.

Valuation of Inventory

Inventories consist of growing and processed plants and oils and are valued at the lower of cost or net realizable value. In evaluating whether inventories are stated at lower of cost or net realizable value, management considers such factors as inventories in hand, estimated time to sell such inventories and current market conditions. Write-offs for inventory obsolescence are recorded when, in the opinion of management, the value of specific inventory items has been impaired.

Our audit procedures to address the Company’s valuation of inventory included the following, among others. We updated to our understanding of the Company’s inventory process, observations of year end quantities, and the testing of the cultivation, manufacturing and processing costs allocated to the various stages of inventory during the year. We also tested the Company’s net realizable values across each inventory and the assumptions used.

Impairment of long-lived assets

The carrying value of long-lived assets are reviewed when facts and circumstances suggest that the assets may be impaired or that the amortization period may need to be changed. The Company considers internal and external factors relating to each asset, including cash flows, local market developments, industry trends and other publicly available information. If these factors and the projected undiscounted cash flows of the Company over the remaining amortization period indicate that the asset will not be recoverable, the carrying value will be adjusted to the fair market value

Our audit procedures relating to the Company’s assessment of impairment of long-lived assets included the following, among others. We evaluated the methodologies and tested the significant assumptions and underlying data used by the Company. Such testing included assessing the reasonableness of the undiscounted cash flow projections used by the Company in their assessment of impairment in comparison with historical data and the Company’s assumptions used for the projections.

We have served as the Company’s auditor since 2017

Hong Kong, China

September 15, 2022 

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

IN US DOLLARS

(Audited)

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

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

IN US DOLLARS

(Audited)

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

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

IN US DOLLARS

(Audited) (CONTINUED)

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

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

IN US DOLLARS

(Audited)

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

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

IN US DOLLARS

(Audited)

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

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS