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

FORM 10-Q

(Mark One)

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

For the quarterly period endedMarch 31,September 30, 2019

☐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)

168 Binbei Street, Songbei District
Harbin City, Heilongjiang Province
People’s Republic of China 150028
(Address of principal executive offices) (Zip Code)

86-451-88100688
(Issuer'sRegistrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒

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

* OTC Markets, not an exchange.

As of May 6,November 8, 2019, there were 65,539,737 shares of common stock, $0.0001 par value per share, issued and outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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

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

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

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

For the Nine Months Ended March 31, 2019 and 2018
(UNAUDITED)

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

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

For the THREE Months Ended March 31, 2019 and 2018
(UNAUDITED)

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

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - ORGANIZATION AND BUSINESS BACKGROUND

China Health Industries Holdings, Inc. (“China Health US”) was incorporated in the State of Arizona on July 11, 1996, and is the successor to the business known as Arizona Mist, Inc., which was incorporated in 1989. On May 9, 2005, China Health US entered into a stock purchase agreement and share exchange (effecting a reverse merger) with Edmonds 6, Inc., a Delaware corporation (“Edmonds 6”), 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 Financial Accounting Standards Board (“FASB”) ACS Topic 915.

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 PRC Company Law. 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 equity interest in Humankind for 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. 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 and the Share Purchase was accounted for as a “reverse merger”. Consequently, the assets, and liabilities and the historical operations that were reflected in the financial statements for the periods prior to the Share Purchase are those of Humankind and have been recorded at historical cost basis. After the 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 formed a 99% owned subsidiary, Harbin Huimeijia Medicine Company (“Huimeijia”), in the PRC. Huimeijia’s primary business is the manufacture and distribution of pharmaceuticals. Mr. Xin Sun, the majority owner of China Health US, ownsowned 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. (the “Transaction”). China Health HK was the acquirer in the Transaction, and the Transaction has been treated as a recapitalization of China Health US. Following the Transaction and a subsequent 20:1 reverse stock split, Mr. Xin Sun owned 61,203,088 shares of common stock of China Health US, representing 98.3% of the 62,234,737 total outstanding shares of common stock. 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 (RMB 100,000,000)(RMB100,000,000). HLJ Huimeijia was formed on October 30, 2003, in the PRC and is engaged in the manufacturing and distribution of tinctures, ointments, rub-in therapeutic pastes, topical solutions, suppositories, enemas, orally-administered liquids, and liniments, (includingincluding traditional Chinese medicine extractions), enemas and orally administered liquids.extractions. HLJ Huimeijia’s predecessor is Heilongjiang Xue Du Pharmaceutical Co., Ltd., which established its brand by supplying high quality medical products. HLJ Huimeijia is categorized as a “high and new technology” enterprise by the Science Technology Department of Heilongjiang Province. HLJ Huimeijia has 21 products whichthat have been approved by, and have received approval numbers issued by, the China State Food and Drug Administration (the “CFDA”). In addition, HLJ Huimeijia is the holder of one patent for a utility model, five patents for external design, and three trademarks in the PRC, including the Chinese brand name “Xue Du”, which has an established reputation among customers in the northeastern PRC.

On December 24, 2014, Humankind entered into a stock transfer agreement (the “Original Agreement”) with Xiuzheng Pharmaceutical Group Co., Ltd., a company incorporated under the laws of the PRC and located in Jilin province (“Xiuzheng Pharmacy” or the “Buyer”), Mr. Xin Sun, the CEO of the Company, and Huimeijia, a subsidiary of Humankindwhich was 99% owned by Humankind and 1% owned by Mr. Xin Sun. Pursuant to the Original Agreement, Humankind and Mr. Xin Sun (the “Equity Holders”), would sellsold their respective equity interests in Huimeijia to Xiuzheng Pharmacy.

On February 9, 2015, the four parties (i.e. Humankind, Xiuzheng Pharmacy, Mr. Xin Sun and Huimeijia) entered into a supplementary agreement (the “Supplementary Agreement”) to modify the terms of the Original Agreement, pursuant to which the Equity Holders and Huimeijia (collectively the “Asset Transferors”) would sell only the 19 drug approval numbers, including the tablet, capsule, powder, mixture, oral liquid, syrup and oral solution under the 19 approval numbers; licenses, including the original copies of Business License, Organization Code Certificate, Tax Registration Certificate, Drug Production Permit and GMP Certificate; and other documents and original copies related to the production and operation of the 19 drugs (the “Assets”) to Xiuzheng Pharmacy. The Equity Holders would have retained their equity interests in Huimeijia, but would have pledged such equity interests to Xiuzheng Pharmacy until the Assets were transferred, at which time the cash consideration would have been paid by the Buyer. Total cash consideration would have been the same as under the Original Agreement, i.e., RMB 8,000,000 (approximately $1,306,186) to the Asset Transferors. In the event that the Assets had failed to be transferred to the Buyer due to the fault of the Asset Transferors, the paid consideration would have been returned to the Buyer with interest accrued. If the failure of the transfer of the Assets were a result of changes in government policy or force majeure, the paid cash consideration would have been returned to the Buyer but without any interest.

On October 12, 2016, the four parties agreed to rescind the Supplementary Agreement and entered into a new supplementary agreement (the “Agreement”“New Supplementary Agreement”), pursuant to which the four parties agreed to execute the transfer of the equity interests based on the Original Agreement and the Equity Holders agreed to sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy. The transfer of 100% of the equity interests of Huimeijia to the Buyer was for total cash consideration of RMB 8,000,000 (approximately $1,306,186) (the “Purchase Price”) to the Equity Holders. Pursuant to the Agreement, 40% of the Purchase Price is due within 10 business days after the signing of the New Supplementary Agreement; 40% of the Purchase Price is due within 10 business days after the completion of the changes in business registration described in the Original Agreement and Xiuzheng Pharmacy obtaining documents evidencing its ownership of Huimeijia; 15% of the Purchase Price is due within 10 business days after the transfer of all of the Assets is approved by the Heilongjiang FDA; and 5% of the Purchase Price is due within 10 business days after all of the Assets have been transferred to Xiuzheng Pharmacy, or its designee, and Humankind and Mr. Xin Sun have instructed Xiuzheng Pharmacy to complete the three-batches production of all forms of the drugs included in the Assets. As of the date of this report, 80% of the Purchase Price has been paid, because the Company has completed changes in its business registration, Xiuzheng Pharmacy has obtained a business license to Huimeijia that was issued by the local State Administration of Industry and Commerce in Harbin (“Harbin SAIC”) that reflects the recording of the ownership of Huimeijia as being held by Xiuzheng Pharmacy and with Harbin SAIC and the legal representative, a person that is authorized to take most of the corporate actions on behalf of a company under the corporate laws in China, of Huimeijia has been appointed by the Buyer. The transfer of all of the drug licenses to the Buyer and the payment of the remainder of the Purchase Price to the Equity Holders are still pending.

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

As of March 31,September 30, 2019, the Company’s corporate structure was as follows:

Note 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

This summary of the Company’s significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management (“Management”), which is responsible for theirthe integrity and objectivity.objectivity of the financial statements and notes. These accounting policies conform to generally accepted accounting principles in the United States ("(“US GAAP"GAAP”) and have been consistently applied in the preparation of the unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted as allowed by such rules and regulations, and Management believes that the disclosures are sufficient to ensureso that the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018.2019. These unaudited condensed consolidated financial statements include all adjustments which, in the opinion of Management, are necessary for a fair presentation of the Company’s financial position and the results of operations.operations of the Company. All such adjustments are of a normal and recurring nature. The results of operations of the Company for the ninethree months ended March 31,September 30, 2019 may not be indicative of results that may be expected for the year ended June 30, 2018.

2020.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include China Health US and its three subsidiary companies, which includesnamely China Health HK, Humankind, and HLJ Huimeijia. All significant intercompany balances and transactions have been eliminated in consolidation and combination.

On November 22, 2013, China Health US, through its wholly owned subsidiary Humankind, completed the acquisition of HLJ Huimeijia. HLJ Huimeijia and Humankind were and are under the common control of Mr. Xin Sun, the CEO of China Health US, before and after the date of transfer. Humankind’s accounting policy adopted the guidance in ASC 805-50-05-5 for the transfer of net assets between entities under common control to apply an accounting method similar to the pooling-of-interests method. Under this method, the financial statements of Humankind shall report results of operations for the period in which the transfer occurs as though the transfer of net assets had occurred at the beginning of the period. Results of operations for that period will thus comprise both those of the previously separate entities combined from the beginning of the period to the date the transfer is completed and those of the combined operations from that date to the end of the period. Similarly, Humankind shall present statements of financial position and other financial information as of the beginning of the period as though the assets and liabilities had been transferred at that date. Financial statements and financial information of Humankind presented for prior years shall also be retrospectively adjusted to furnish comparative information.

Segment Reporting

FASB Accounting Standard Codification (“ASC”) Topic 280, “Segment Reporting”., established standards for reporting information about operating segments on a basis consistent with a company'scompany’s internal organizational structure, as well as information about geographical areas, business segments, and major customers in financial statements for details on the Company'sCompany’s business segments. The Company has three reportable operating segments: Humankind, HLJ Huimeijia, and “Others”. The segments are grouped based on the types of products provided.

Fair Value of Financial Instruments

The provisions of FASB ASC Topic 820 accounting guidance that apply to the Company require all entities to disclose the fair value of financial instruments, including both assets and liabilities recognized and those not recognized on the balance sheets, for which it is practicable to estimate fair value, and defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.

Fair Value Measurements

FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosures about the use of fair value measurements.

Various inputs are considered when determining the fair value of the Company’s debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the following three broad levels:levels listed below:

Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets;markets.

Level 2 – other significant observable inputs, (includingincluding quoted prices for similar securities, interest rates, credit risk, etc.); andetc..

Level 3 – significant unobservable inputs, (includingincluding the Company’s own assumptions in determining the fair value of investments).

investments.

The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or a nonrecurring basis. Financial assets and liabilities measured on a nonrecurringnon-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The Company had no financial assets or liabilities carried and measured on a recurring basis during the reporting periods.

The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors, including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant discretion of Management. For other financial instruments, pricing inputs are less observable in the market and may require judgment of Management.

Translation of Foreign Currencies

Humankind and HLJ Huimeijia maintain their books and accounting records in the PRC currency “Renminbi” (“RMB”), which has been determined to be the Company’s functional currency.

Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates prevailing on the dates of the respective transactions, as quoted by the Federal Reserve Board. Foreign currency exchange gains and losses resulting from these transactions are included in operations.

Humankind and HLJ Huimeijia’s financial statements are translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the aboveaforementioned entities are translated at the prevailing exchange rate at the end date of each reporting period end date.period. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from the translation of these financial statements are reflected as accumulated other comprehensive income in shareholders’ equity and non-controlling interests.

Statement of Cash Flows

In accordance with Statement FASB ASC Topic 230, “Statement of Cash Flows”, cash flow from the Company'sCompany’s operations is calculated based upon the local currencies and translated to the reporting currency using an average foreign exchange rate for the reporting period. As a result, amounts related to assets and liabilities reported in the statement of cash flows will not necessarily be the same as changes in the corresponding balances on the balance sheet.sheets.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with US GAAP requires Management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment changes. Significant estimates and assumptions by Management include, among others, useful liveslife of long-lived assets and intangible assets, valuation of inventory, accounts receivable and notes receivable, impairment analysis of long-lived assets, construction in progress, intangible assets, and deferred taxes. While Management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits in banks with maturities of three months or less, and all highly liquid investments which are unrestricted as to withdrawal or use and which have original maturities of three months or less at the time of purchase.

As of March 31,September 30, 2019 and June 30, 2018,2019, the Company’s uninsured bank balances were mainly maintained at financial institutions located in the PRC and Hong Kong. The uninsured bank balances were $35,219,487$34,981,352 and $32,614,910$35,507,535 as of March 31,September 30, 2019 and June 30, 2018,2019, respectively. The Company had no insured bank balances as of March 31,September 30, 2019 and June 30, 2018, respectively.2019.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business, but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on Management’s assessment of known requirements, aging of receivables, payment and bad debt history, the customer’s current credit worthiness, changes in customer payment patterns and the economic environment (the “Allowance”). Onenvironment. From November 1, 2013, the Company changed its credit policy by offering ninety (90) day payment terms for sales agents, whereas the payment terms for sales agents before November 1, 2013 were thirty (30) days.agents. As of March 31,September 30, 2019 and June 30, 2018,2019, the balances of accounts receivable were $2,064,059$1,829,792 and $1,512,678,$1,987,505, respectively. The Company determines the Allowanceallowance based on aging data, historical collection experience, customer specific facts, and economic conditions. Account balances are charged off against the Allowanceallowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company evaluated the nature of all accounts receivable then provided allowance for doubtful accounts. The Company has determined that an Allowanceallowance of $56,543$33,637 and $57,245$71,713 was appropriate as of March 31,September 30, 2019 and June 30, 2018,2019, respectively.

Advances to Suppliers

The Company periodically makes advances to certain vendors for purchases of raw materials or to service providers for services relating to construction plans for its plants, equipment and production lines for GMP upgrading, and records these payments as advances to suppliers. As of March 31,September 30, 2019 and June 30, 2018,2019, advances to suppliers amounted to $32,884$198,288 and $94,749,$8,619, respectively. The increase by $189,669 was mainly attributable to a new equipment Humankind bought which was still in transit as of September 30, 2019.

Inventory

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

Inventory is stated at the lower of either cost or market value and consists of materials, labor and overhead. HLJ Huimeijia uses the weighted average method for inventory valuation. The other subsidiaries of the Company use the first-in, first-out (“FIFO”) method for inventory valuation. Overhead costs included in finished goods include direct labor costs and other costs directly applicable to the manufacturing process. The Company evaluates inventory for excess, slow moving, and obsolete inventory, as well as inventory for which the value of which is in excess of its net realizable value. This evaluation includes analysis of sales levels by product and projections of future demand. If future demand or market conditions are less favorable than the Company’s projections, a write-down of inventory may be required, and would be reflected in cost of goods sold in the period the revision is made. InventoryThe inventory allowance was nilin the amounts of $nil and $160,394$nil were provided for the nine months ended March 31,as of September 30, 2019 and 2018,June 30, 2019, respectively.

Impairment of Long-Lived Assets

The Company’s long-lived assets and other assets are reviewed for impairment in accordance with the guidance of the FASB ASC Topic 360-10, “Property, Plant, and Equipment”, and FASB ASC Topic 205, “Presentation of Financial Statements”. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of the asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve Management’s estimates on an asset’sasset useful life and future cash flows. Actual useful liveslife and cash flows could be different from those estimated by Management, which could have a material effect on the Company’s reporting results and financial position. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. As of March 31,September 30, 2019 and June 30, 2018,2019, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future.

Property, Plants and Equipment

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

When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gains or losses are included in the results of operations in the reporting period of disposition.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The depreciable liveslife applied are:

Intangible Assets

The Company evaluates intangible assets in accordance with FASB ASC Topic 350, “Intangibles — Goodwill and Other”. Intangible assets deemed to have indefinite life are not amortized, but are subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required. The value of the Company’s intangible assets could be impacted by future adverse changes such as the following:as: (i) any future declines in the Company’s operating results, (ii) a decline in the valuation of technology, orincluding the valuation of the Company’s common stock, (iii) a significant slowdown in the worldwide economy, or (iv) any failure to meet the performance projections included in the Company’s forecasts of future operating results. In accordance with FASB ASC Topic 350, the Company tests intangible assets for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve Management’s estimates of an asset’sasset useful life and future cash flows. Significant judgment byof Management is required in the forecastforecasts of future operating results that are used in the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If the Company’s actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, wethe Company could incur additional impairment charges in a future period. Based on such evaluations, there was no impairment recorded for intangible assets, for the ninethree months ended March 31,September 30, 2019 and 2018, respectively.2018.

Construction in Progress

Construction in progress represents the costs incurred in connection with the construction of buildings or new additions to the Company’s plant facilities. Costs classified as construction in progress include all costs of obtaining the asset and bringing it to the location in theand condition necessary for its intended use. No depreciation is provided for construction in progress until such time as the assets are completed and are placed into service.

The Company reviews the carrying value of construction in progress for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the assets. The factors considered by Management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment, there werewas no impairments recorded for construction in progress, for the ninethree months ended March 31,September 30, 2019 and 2018, respectively.2018.

Revenue Recognition

The Company recognizes revenue at the amount to which it expects to be entitled when itcontrol of the products or services is both earned and realized or realizable. The Company’s policy is to recognize revenue when title to the product, ownership and risk of loss have transferred to its customers. Control is generally transferred when the customer, persuasive evidenceCompany has a present right to payment and title and the significant risks and rewards of an arrangement exists and collectionownership of products or services are transferred to its customers. For most of the Company’s products net sales, proceeds is reasonably assured, all of which generally occur upon shipment of goods to customers.control transfers when products are shipped. The majority of the Company’s revenue relates to the sale of inventory to customers, and revenue is recognized when title andcontrol of the risks and rewards of ownership passproducts or services is transferred to the customer.its customers. Given the nature of the Company’s business and the applicable rules guiding revenue recognition, the Company’s revenue recognition practices do not contain estimates that materially affect the results of operations. The Company records revenue at the discounted selling price and allows its customers to return products for exchange or credit subject to certain limitations. A provision for such returns is recorded based upon historical experience. There has been no provision recorded for returns based upon historical experience for the ninethree months ended March 31,September 30, 2019 and 2018, respectively.

Cost of Goods Sold

Cost of goods sold consists primarily of the costs of raw materials, freight charges, direct labor, depreciation of plants and machinery, warehousing and overhead costs associated with the manufacturing process, and commission expenses.

Income Taxes

The Company has adopted FASB ASC Topic 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years based on the differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

In July 2006, the FASB issued FIN 48(ASC 740-10), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109 (ASC 740)”, which requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under FIN 48(ASC 740-10), tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

As a result of the implementation of FIN 48 (ASC 740-10), the Company undertook a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by FIN 48 (ASC 740-10). The Company recognized no material adjustments to liabilities or stockholders’ equity as a result of the implementation. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment, and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations, and court rulings. Therefore, the actual liability may be materially different from the Company’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or deferred tax asset valuation allowance.

Enterprise Income Tax

Under the Provisional Regulations of the PRC Concerning Income Tax on Enterprises promulgated by the PRC (the “EIT Law”), income tax is payable by enterprises at a rate of 25% of their taxable income.

Value Added Tax

The Provisional Regulations of the PRC Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax (“VAT”) is imposed on goods sold in, or imported into, the PRC, and on processing, repair and replacement services provided within the PRC.

VAT payable in the PRC is charged on an aggregated basis at a rate of 13% or 16% (depending on the type of goods involved) on the full price collected for the goods sold, or, in the case of taxable services provided, at a rate of 17%16% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of VAT included in the price or charges, and less any deductible VAT already paid by the taxpayer on purchases of goods and services in the same financial year. As of March 31,September 30, 2019 and June 30, 2018,2019, VAT payables were $172,829$126,976 and $132,439,$120,114, respectively.

Sales RelatedSales-Related Taxes

Pursuant to the tax law and regulations of the PRC, the Company is obligated to pay 7% and 5% of the annual aggregate VAT paid by the Company as taxes for the purposes of maintaining and building cities and educational facilities, which fees are included as sales-related taxes. Sales-related taxes are recorded when sales revenue is recognized. Sales relatedSales-related taxes were $115,762$25,118 and $120,687$28,688 for the ninethree months ended March 31,September 30, 2019 and 2018, respectively.

Concentrations of Business and Credit Risks

All of the Company’s manufacturing takes place in the PRC. There can be no assurance that the Company will be able to successfully continue to manufacture its products and failure to do so would have a material adverse effect on the Company’s financial position, results of operations, and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond Management’s control. These contingencies include general economic conditions, prices of raw materials, competition, governmental and political conditions, and changes in regulations. Since the Company is dependent on trade in the PRC, the Company is subject to various additional political, economic, and other uncertainties. Among other risks, the Company’s operations will be subject to the risks of restrictions on transfer of funds, domestic customs, changing taxation policies, foreign exchange restrictions, and political and governmental regulations.

The Company operates in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between U.S. dollars and RMB. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting periods.

Earnings Per Share

Basic earnings per common share are computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding during the period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. For the ninethree months ended March 31,September 30, 2019 and 2018, the Company had no potential dilutive common stock equivalents outstanding.

Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period.

FASB ASC Topic 260, “Earnings Per Share”, requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations.

Recent Accounting Pronouncements

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for the Company as of its first quarter of fiscal 2018 and the Company had the choice of using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (modified retrospective method).

In AprilJune 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers2016-13, Financial Instruments-Credit Losses (Topic 606): Identifying Performance Obligations and Licensing.326) – Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The main objective of the standard is to clarifyprovide financial statement users with more decision-useful information about the two aspectsexpected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In issuing this standard, the FASB is responding to criticism that today’s guidance delays recognition of Topic 606: identifying performance obligationscredit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. The standard is applicable to loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, loan commitments and certain other off-balance sheet credit exposures, debt securities (including those held-to-maturity) and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The CECL model does not apply to available-for-sale debt securities. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the licensing implementation guidance, while retainingcredit losses will be recognized as allowances rather than reductions in the related principlesamortized cost of the securities. Accordingly, the new methodology will be utilized when assessing the Company’s financial instruments for these areas.impairment. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU affectsalso simplifies the guidance inaccounting model for purchased credit-impaired debt securities and loans. ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. ASU 2016-13 is not yet effective. The effective date and transition requirements for this ASU areyears beginning after December 15, 2019, including interim periods within those fiscal years under a modified retrospective approach. Early adoption is permitted for the same asperiods beginning after December 15, 2018.The Company plans to adopt the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,defers the effective date of ASU 2014-09 by one year. The Company adopted the new standardguidance from July 1, 2018, using2020. And the modified retrospective transition method allowed pursuant to ASU 2014-09. The Company finalized its analysis and believes the adoption of this guidance didis not expected to have a material impact on the Company’s consolidated financial statements and its internal controls over financial reporting.

Except

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which modifies the disclosure requirements on fair value measurements, including removing the requirement to disclose (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels and (3) the valuation processes for Level 3 fair value measurements. ASU 2018-13 also added new disclosures including the requirement to disclose (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU above, in2018-13 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019 and early adoption is permitted. This standard will only impact the perioddisclosures pertaining to fair value measurements. The Company plans to adopt the guidance from JanuaryJuly 1, 2019 to March 31, 2019,2020. And the FASB has issued ASU No. 2019-01Company finalized its analysis and ASU 2019-02, which arebelieves the adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements upon adoption.and its internal controls over financial reporting.

NOTE 3 - ACCOUNTS RECEIVABLE

The Company’s accounts receivable were $2,064,059$1,829,792 and $1,512,678 ,$1,987,505, net of allowances for doubtful accounts amounting to $56,543$33,637 and $57,245,$71,713, as of March 31,September 30, 2019 and June 30, 2018,2019, respectively.

NOTE 4 - INVENTORY

Inventory of the Company consisted of following:

The inventory allowance in the amounts of nil$nil and $160,394$nil were provided for the nine months ended March 31,as of September 30, 2019 and 2018,June 30, 2019, respectively.

NOTE 5 - CONSTRUCTION IN PROGRESS

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

On April 6, 2012, HLJ Huimeijia entered into an agreement with a contractor for construction of the HLJ Huimeijia plant. The estimated total cost of construction was approximately $1.86 million (RMB 12,800,000) and construction was anticipated to be completed by December 2016.2019. As of March 31,September 30, 2019, 63%74% of construction has been completed, $1,109,562 (RMB 7,447,225)$1,324,030(RMB9,463,771) has been recorded as costs of construction in progress and construction in progress at an amount of $65,860$470,418 (RMB 442,040)3,362,409) has been completed and converted into property, plant and equipment.

NOTE 6 - PROPERTY, PLANTS AND EQUIPMENT

Property, plants and equipment consisted of the following:

Depreciation expenses were $265,406was $85,329 and $227,706$75,657 for the ninethree months ended March 31,September 30, 2019 and 2018, respectively. Depreciation expenses charged to operations were $110,064was $36,136 and $82,691$23,375 for the ninethree months ended March 31,September 30, 2019 and 2018, respectively. Depreciation expenses charged to cost of goods sold were $155,342was $49,194 and $145,015$52,282 for the ninethree months ended March 31,September 30, 2019 and 2018, respectively.

NOTE 7 - INTANGIBLE ASSETS

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

All land in the PRC belongs to the government of the PRC. Enterprises and individuals can pay the PRC government a fee to obtain the right to use a piece of land for commercial purposes or residential purposes for an initial period of 50 years or 70 years as applicable.years. These land use rights can be sold, purchased, and exchanged in the market. AnyThe successive owner of the land use right wouldwill have the right to use the land for the time remaining on the initial period.

Amortization expenses were $354,382was $114,607 and $239,049$118,147 for the ninethree months ended March 31,September 30, 2019 and 2018, respectively.

NOTE 8 - RELATED PARTY DEBTS

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

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

NOTE 9 - INCOME TAXES

(a) Corporate income taxes

United States

China Health US was organized in the United States. China Health US had no taxable income for US income tax purposes for the ninethree months ended March 31,September 30, 2019 and 2018, respectively.2018. As of March 31,September 30, 2019, China Health US had a net operating loss carry forward for United States income taxes.tax purposes. Net operating loss carry forwards are available to reduce future years’ taxable income. Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s operating history and the continued losses of its US entity. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. There were no changes in the valuation allowance for the ninethree months ended March 31,September 30, 2019 and 2018. Management reviews this valuation allowance periodically and makes adjustments accordingly.

Hong Kong

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

People’s Republic of China

Under the EIT Law, the standard EIT rate is 25%. The PRC subsidiaries of the Company are subject to PRC income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they operate.

The provision for income taxes of the Company consisted of the following for the three and nine months ended March 31,September 30, 2019 and 2018 :2018:

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

(b) Uncertain tax positions

There were no unrecognized tax benefits as of March 31,September 30, 2019 and June 30, 2018, respectively.2019. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its tax positions. For the ninethree months ended March 31,September 30, 2019 and 2018, the Company did not incur any interest or penalties arising from its tax payments.

NOTE 10 - EARNINGS/(LOSS)EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding during the period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants.

Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing dilutive earnings per share. It assumes that any proceeds would be used to purchase common stock at the average of the market price of the common stock during the period.

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations.

For the ninethree months ended March 31,September 30, 2019 and 2018, the Company did not have potential dilutive shares. The following table sets forth the computation of basic and diluted net income per share:

NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company’s assets are located in the PRC and revenues are derived from operations in the PRC.

In terms of industry regulations and policies, the economy of the PRC has been transitioning from a planned economy to market oriented economy. Although in recent years the PRCChinese government has implemented measures emphasizing the utilization of market forces for economic reforms, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by the PRCChinese government. For example, all land is state owned and leased to business entities or individuals through the PRC government’s granting of land use rights.Land Use Rights. The granting process is typically based on government policies at the time of granting and can be lengthy and complex. This process may adversely affect the Company’s future manufacturing expansions. The PRCChinese government also exercises significant control over the PRC’s economic growth through the allocation of resources and providing preferential treatment to particular industries or companies. Uncertainties may arise with changing of governmental policies and measures.

The Company faces a number of risks and challenges not typically associated with companies in North America orand Western Europe, becausesince its assets exist solely in the PRC, and its revenues are derived from its operations therein. The PRC is a developing country with an early stage market economic system, which is overshadowed by the state. Its political and economic systems are very different from the more developed countries and are in a state of change. The PRC also faces many social, economic and political challenges that may produce major shocks, instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States. Such shocks, instabilities and crises may in turn significantly and negatively affect the Company’s performance.

The Company had no rental commitmentscommitment as of March 31,September 30, 2019.

NOTE 12 - MAJOR SUPPLIERS AND CUSTOMERS

For the ninethree months ended March 31,September 30, 2019, the Company had three suppliers that in the aggregate accounted for 73%76% of the Company’s purchases, for operations, with each supplier accounting for 47%41%, 15%18%, and 11%17%, respectively.

For the ninethree months ended March 31,September 30, 2018, the Company had twothree suppliers that in the aggregate accounted for 88%86% of the Company’s purchases, with each supplier accounting for its continuing operations.37%, 36%, and 13%, respectively.

For the ninethree months ended March 31,September 30, 2019, the Company had six customers that in the aggregate accounted for 81%79% of the Company’s total sales, for operations, with each customer accounting for 20%, 16%, 15%14%, 11%, 11%10%, and 8%, respectively.

For the ninethree months ended March 31,September 30, 2018, the Company had six customers that in the aggregate accounted for 68%84% of the Company’s total sales, for the continuing operations, with each customer accounting for 21%, 17%, 14%15%, 12%, 9%11%, 9% and 7%8%, respectively.

NOTE 13 - SEGMENT REPORTING

The Company is organized into the following three main business segments based on the types of products being provided to customers: HLJ Huimeijia, Humankind, and “Others”. Each of the three aforementioned operating segments referenced above has separate and distinct general ledgers. The chief operating decision maker (“CODM”) receives financial information, including information regarding revenue, gross margin, operating income, and net income, from the various general ledger systems to make decisions about allocating resources and assessing performance; however, the principal measure of segment profitability or loss used by the CODM is net lossincome (loss) by segment.

The following tables present summary information by segment for the three and nine months ended March 31,September 30, 2019 and 2018, respectively:

NOTE 14 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined that there are no additional items to disclose except the above mentioned matters.disclose.

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,”“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 unaudited condensed consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this report.

Except as otherwise indicated by the context, references in this report to “we,” “us,”“we”, “us”, “our”, “the Registrant”, “our” “the Registrant,” “our Company,” 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 CFDA-approved medicines, 14 CFDA-approved health supplement products and 8 hemp derivative products in soft capsule, hard capsule, tablet, granule, and oral liquid forms. These products address the needs of some key sectors in China, including the feminine, geriatric, and children’s markets.

HLJ Huimeijia was founded on October 30, 2003 and its latest GMP certificate is effective until April 24, 2023. HLJ Huimeijia engages in the manufacture and distribution of tincture, ointments, rubber paste, including hormones, topical solution, suppositories, enemas, oral liquids, and liniment, including traditional Chinese medicine extractions. HLJ Huimeijia’s predecessor was Heilongjiang Xue Du Pharmaceutical Co., Ltd., which established brand recognition in the market through its supply of high-quality drug products. HLJ Huimeijia is a “high and new technology” enterprise that provides the most comprehensive types of topical medical products in Heilongjiang Province, a northeastern province of China.

On December 24, 2014,We have developed the following products that are derived from hemp and obtained business license to manufacture and sell these products. We began to sell these products since May 2018. Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and Collagen Peptide are sold through Humankind, entered into a stock transfer agreement (the “Original Agreement”) with Xiuzheng Pharmaceutical Group Co., Ltd. a company incorporated under the lawsOther cosmetics are sold through HLJ Huimeijia. The revenue of the PRCHemp Oil, Hemp Protein Powder, Hemp Polypeptide and located in Jilin province (“Xiuzheng Pharmacy” orCollagen Peptide accounted for 98.69% and 99.23% for the “Buyer”), Mr. Xin Sun, the CEO of the Company,three-month periods ended September 30, 2019 and Huimeijia, 99% owned by Humankind and 1% owned by Mr. Xin Sun. Pursuant to the Original Agreement, Humankind and Mr. Xin Sun (the “Equity Holders”), would sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy. On February 9, 2015, the four parties (i.e. Humankind, Xiuzheng Pharmacy, Mr. Xin Sun and Huimeijia) 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, the “Purchase Price”) to the Equity Holders. On October 12, 2016, Huimeijia has completed changes in its business registration, and Xiuzheng Pharmacy has 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 is recorded as held by Xiuzheng Pharmacy with Harbin SAIC, and the legal representative (a person that is authorized to take most of corporate actions on behalf of a company under PRC corporate laws) of Huimeijia has been appointed by the Buyer.2018, respectively.