CHINA HEALTH INDUSTRIES HOLDINGS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

FORWARD LOOKING STATEMENTS




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



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

? the effect of political conditions, economic conditions, market conditions,

    and geopolitical events;

  ? legislative and regulatory changes that affect our business;

  ? the availability of funds and working capital; and

  ? the actions and initiatives of current and potential competitors.




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



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

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



                                       19





Business Overview


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




The Company owns a GMP-certified plant and production facilities and has the
capacity to produce 21 different NMPA-approved medicines, 14 NMPA-approved
health supplement products and 8 hemp derivative products in soft capsule, hard
capsule, tablet, granule, oral liquid forms. These products address the needs of
some key sectors in China, including the feminine, geriatric, and children's
markets.



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



There is significant uncertainty around the breadth and duration of business
disruptions related to COVID-19, as well as its impact on the economy of China,
U.S. and the rest of the world and, as such, the extent of the business
disruption and the related financial impact cannot be reasonably estimated
at
this time.



We have developed the following products that are derived from hemp and obtained
business license to manufacture and sell these products. We began to sell these
products since May 2018. Hemp Oil, Hemp Protein Powder, Hemp Polypeptide and
Collagen Peptide are sold through Humankind, Other cosmetics are sold through
HLJ Huimeijia. The revenue of the Hemp Oil, Hemp Protein Powder, Hemp
Polypeptide and Collagen Peptide accounted for 0.00% and 0.00% for the
three-month periods ended September 30, 2022 and 2021, respectively.



Serial No. Name

    1        Hemp Oil
    2        Hemp Protein Powder
    3        Hemp Polypeptide
    4        Collagen Peptide
    5        Natural Hemp Essence Repair Lotion
    6        Natural Hemp Revitalizing Essence
    7        Natural Hemp Anit-aging Brightening Eye Cream
    8        Natural Hemp Frozen Age Nourishing Cream




Our business model is to sell our products directly to end customers through our
own sales personnel as well as our sales agents, operating primarily in Anhui,
Zhejiang, Shanghai, Jiangsu, Beijing and Gansu, where most of our revenues are
used to be generated. Because of COVID-19 affect influence and the
"Transformation of the Company", we did not sell our product to sales agents for
the three months ended September 30, 2022. Humankind is using existing materials
to research and develop hemp related products. Humankind decided to transform
the primary business to Cannabidiol ("CBD") extractive project, following the
government's guidance in expanding the use of hemps into cosmetics, food, or
daily uses. The Company will also receive the government's sponsorship in R&D
expenses to support the company research in CBD aspect, including various
industrial and biological application. However, by the end of fiscal year 2022,
the support guidelines had not been published. Although the research process is
slow and unpredictable due to the zero-case policy and periodic quarantines
caused by COVID-19 resurgence, we expect the CBD extractive project to start
generating revenue and finally balance our investment in the hemp related
products by 2024 ("Transformation").



                                       20





Results of Operations


Three months ended September 30, 2022 compared to the three months ended
September 30, 2021

The following table summarizes the top lines of the results of our operations
for the three months ended September 30, 2022 and 2021, respectively:



                      September 30,       September 30,
                          2022                2021           Variance          %
Revenues             $             -     $           266     $    (266 )     -100.00 %
Humankind                          -                   -             -
HLJ Huimeijia                      -                 266          (266 )     -100.00 %
Cost of Goods Sold   $             -     $         1,744     $  (1,744 )     -100.00 %
Humankind                          -                   -             -
HLJ Huimeijia                      -               1,744        (1,744 )     -100.00 %
Gross Profit         $             -     $        (1,478 )   $   1,478       -100.00 %
Humankind                          -                   -             -
HLJ Huimeijia                      -              (1,478 )       1,478       -100.00 %




Revenue



Total revenues decreased by $266 or 100.00% for the three months ended September
30, 2022, as compared to the same period in 2021. The decrease in Humankind's
sales revenues was primarily due to Humankind's enterprise Transformation and
COVID-19 resurgence. Humankind is using existing materials to research and
develop hemp related products. Humankind decided to transform the primary
business to Cannabidiol ("CBD") extractive project, following the government's
guidance in expanding the use of hemps into cosmetics, food, or daily uses. The
Company will also receive the government's sponsorship in R&D expenses to
support the company research in CBD aspect, including various industrial and
biological application. However, by the end of fiscal year 2022, the support
guidelines had not been published. Although the research process is slow and
unpredictable due to the zero-case policy and periodic quarantines caused by
COVID-19 resurgence, we expect the CBD extractive project to start generating
revenue and finally balance our investment in the hemp related products by
2024
("Transformation").



Our total cost of goods sold decreased by $1,744 or 100.00% for the three months
ended September 30, 2022 as compared to the same period in 2021. The decrease in
Humankind's sales revenues was primarily due to Humankind's enterprise
Transformation, also sales were not smooth because of factory shut down under
COVID-19. Our gross margin decreased by $1,478 or 100.00% for the three months
ended September 30, 2022 as compared to the same period in 2021. This change was
consistent with the change of sales and costs in HLJ Huimeijia and Humankind.
The decrease in Humankind's sales revenues was primarily due to Humankind's
enterprise Transformation, also sales were not smooth because of factory shut
down under COVID-19.



Sales by Product Line


The following table summarizes a breakdown of our sales by major product lines
for the three months ended September 30, 2022 and 2021 respectively:




                                              September 30, 2022                          September 30, 2021
                                    Quantity                         % of        Quantity                        % of
                                     (Unit)         Sales US$       Sales         (Unit)        Sales US$       Sales
Humankind
Hemp Oil                                     -     $         -            - %            -     $         -            - %
Collagen Peptide                             -               -            - %            -               -            - %
Hemp Polypeptide                             -               -            - %            -               -            - %
Hemp Protein Powder                          -               -            - %            -               -            - %
HLJ Huimeijia
Muskiness Bone Strengthener
Paste                                        -               -            - %          223              18         6.87 %
Dampness dispelling pain
ointment                                     -               -            - %        1,852             152        57.05 %
Refining Cream dogskin                       -               -            - %          788              65        24.28 %
Indometacin and Furazolidone
Suppositories                                -               -            - %          383              31        11.80 %
ShangBiTongDing                              -               -            - %            -               -            - %
Enema Glycerini                              -               -            - %            -               -            - %
Essence repair liquid                        -               -            - %            -               -            - %
Total                                        -     $         -            - %        3,246     $       266       100.00 %




                                       21





Operating Expenses


The following table summarizes our operating expenses for the three months ended
September 30, 2022 and 2021, respectively:



                                                September 30,       September 30,
                                                    2022                2021           Variance         %
Operating Expenses
Selling, general and administrative            $       334,846     $       255,073     $  79,773        31.27 %
Depreciation and amortization                          155,877            
179,950       (24,073 )     (13.38 )%
Total Operating Expenses                       $       490,723     $       435,023     $  55,700        12.80 %



Total operating expenses for the three months ended September 30, 2022 were
$55,700 or 12.80% higher than those in the corresponding period in 2021. The
increase in operating expenses was primarily attributable to increase of $79,773
or 31.27% in selling general and administrative expenses, which is mainly due to
non-production expense and the legal and professional fee which increased due to
the exchange rate.


Interest Income and Interest Expense

Interest income was $34,483 for the three months ended September 30, 2022, as
compared to $41,034 for the three months ended September 30, 2021. This decrease
of $6,551, or 15.96% was mainly due to the decreased average balance of bank
deposits compared with the same period of 2022 with 2021.



Interest expense was $nil for the three months ended September 30, 2022, as
compared to $nil for the three months ended September 30, 2021.



Income Taxes


Income taxes decreased by $107,057 or 100.00%, from $107,057 for the three
months ended September 30, 2021 to $nil for the three months ended September 30,
2022
. The decrease in income taxes was primarily due to the decrease of net
profits before income taxes.



                                       22




Net Income and Net Income Per Share




Net loss was $456,445 for the three months ended September 30, 2022, as compared
to $21,387 net loss for the three months ended September 30, 2021. This increase
of $435,058 in net loss was primarily attributable to the decrease of other
income, net of $481,302.



Net loss per share was $0.0070 for the three months ended September 30, 2022 and
$0.0003 net loss per share for the three months ended September 30, 2021,
respectively. This increase 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 and loans from our major shareholder, will be
adequate to fund our operations in the ordinary course of business, anticipated
capital expenditures, debt payment requirements, and other contractual
obligations for at least the next twelve months. However, this belief is based
upon many assumptions and is subject to numerous risks, and there can be no
assurance that we will not require additional funding in the future.



The following table summarizes our cash and cash equivalents positions, our
working capital, and our cash flow activities as of September 30, 2022 and June
30, 2022
and for the three months ended September 30, 2022 and 2021:




                             September 30,        June 30,
                                 2022               2022
Cash and cash equivalents   $    42,120,164     $ 44,789,999
Working capital             $    35,129,591     $ 37,652,693
Inventories                 $       469,101     $    521,229




                                         For the
                                   Three Months ended
                                      September 30,
                                  2022             2021
Cash provided by (used in):
Operating activities          $     (17,534 )   $ 2,279,612
Investing activities          $           -     $         -
Financing activities          $           -     $         -



For the three months ended September 30, 2022, our net decrease in cash and cash
equivalents totaled $2,669,835, which total was comprised of net cash provided
by operating activities in the amount of $(17,534) and the effect of prevailing
exchange rates on our cash position of $(2,652,301).



For the three months ended September 30, 2021, our net increase in cash and cash
equivalents totaled $1,594,933, which total was comprised of net cash provided
by operating activities in the amount of $2,279,612, and the effect of
prevailing exchange rates on our cash position of $(684,679).



Our working capital at September 30, 2022 was $35,129,591, compared to working
capital of $37,652,693 at June 30, 2022. This decrease of $2,523,102 or 6.70%
was primarily attributable to the decrease of cash and cash equivalents
$2,669,835.



Net cash used in operating activities was $17,534 for the three months ended
September 30, 2022, primarily attributable to net loss in the amount of $456,445
with adjustments of $155,877 of depreciation and amortization expenses, a
decrease of account receivable in the amount of $1,646,539 and a decrease of
amount due to related parties in the amount of $1,616,525, which offset by the
increase of advance from customers in the amount of $ 1,058,083. The negative
effect of exchange rate changes on cash and cash equivalents in the amount of
2,652,301 for the three months ended September 30, 2022 was mainly a result of
the effect of the valuation of the RMB against the USD on the significant amount
of cash and cash equivalents held by the Company in RMB. The exchange rates from
USD to RMB were 6.6981 to 1 and 7.1135 to 1 as of June 30, 2022 and September
30, 2022, respectively, and the average exchange rate from USD to RMB was 6.8520
for the three months ended September 30, 2022.



                                       23





Net cash provided by operating activities was $2,279,612 for the three months
ended September 30, 2021, primarily attributable to net loss in the amount of
$21,387 with adjustments of $210,060 of depreciation and amortization expenses,
a decrease of accounts receivable in the amount of $1,646,538, increase of
amounts due to related parties in the amount of $813,111 which offset by the
decrease of accounts payables and accrued expenses in the amount of $471,032.
The negative effect of exchange rate changes on cash and cash equivalents in the
amount of $684,679 for the three months ended September 30, 2021 was mainly a
result of the effect of the valuation of the RMB against the USD on the
significant amount of cash and cash equivalents held by the Company in RMB. The
exchange rates from USD to RMB were 6.4566 to 1 and 6.4434 to 1 as of June 30,
2021 and September 30, 2021, respectively, and the average exchange rate from
USD to RMB was 6.4699 for the three months ended September 30, 2021.



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



Related Party Debts


We had related party debts in the amount of $5,619,063 as of September 30, 2022,
as compared to $6,759,761 as of June 30, 2022, a decrease of $1,140,698 or
16.87%. Our related party debts mainly consist of a loan from Mr. Xin Sun, the
CEO of the Company. The loan is unsecured, non-interest bearing, and has no
fixed terms of repayment. There was no written agreement for the loan. See
Note
8.


Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates




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


There have been no material changes during the three months ended September 30,
2022 in the Company's significant accounting policies to those previously
disclosed in the annual report on Form 10-K for the fiscal year ended June
30,
2022.



                                       24

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