WEB NEWS Investor Alert
Based upon their evaluation as of the end of the periods covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective to satisfy the objectives, based on the fact that we do not have any full-time accounting personnel who have U.S. GAAP experience.
Comments & Business Outlook
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
For the Three Months Ended
For the Nine Months Ended
March 31,
March 31,
March 31,
March 31,
2016
2015
2016
2015
REVENUE $
1,677,273
$
1,933,377
$
6,358,992
$
8,211,156
COST OF GOODS SOLD
1,175,123
1,403,081
4,594,285
5,796,457
GROSS PROFIT
502,150
530,296
1,764,707
2,414,699
OPERATING EXPENSES
Selling, general and administrative expens
439,203
515,085
1,439,223
1,570,843
Depreciation and amortization expenses
147,790
173,083
480,209
516,679
Total operating expenses
586,993
688,168
1,919,432
2,087,522
INCOME (LOSS) FROM OPERATIONS
(84,843
)
(157,872
)
(154,725
)
327,177
OTHER INCOME/(EXPENSES)
Interest income
17,667
24,479
53,191
72,865
Interest expense
(21,720
)
(31,276
)
(80,199
)
(93,474
)
Other income, net
9,148
9,623
30,523
29,179
Total other income, net
5,095
2,826
3,515
8,570
INCOME (LOSS) BEFORE INCOME TA
(79,748
)
(155,046
)
(151,210
)
335,747
Provision for income taxes
35,077
25,754
105,960
186,292
NET INCOME (LOSS)
(114,825
)
(180,800
)
(257,170
)
149,455
Less: net loss attributable to non- controlling interests
(2
)
(18
)
(6
)
(18
)
Net income (loss) attributable to China
Health Industries Holdings
(114,823
)
(180,782
)
(257,164
)
149,473
Foreign currency translation gain/(loss)
162,205
35,113
(1,413,191
)
26,672
Comprehensive income/(loss)
47,380
(145,687
)
(1,670,361
)
176,127
Less: comprehensive loss attributable to non- controlling interests
(1
)
(36
)
(14
)
(36
)
INCOME/(LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS $
47,381
$
(145,651
)
$
(1,670,347
)
$
176,163
Net income (loss) attributable to China
Basic & diluted income (loss) per share
$
(0.002
)
$
(0.003
)
$
(0.004
)
$
0.002
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
65,559,092
62,239,737
65,546,330
62,239,737
Comments & Business Outlook
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
For the Three Months Ended
For the Six Months Ended
December 31,
December 31,
December 31,
December 31,
2015
2014
2015
2014
REVENUE $
2,725,651
$
3,117,562
$
4,681,719
$
6,277,779
COST OF GOODS SOLD
2,000,198
2,179,413
3,419,162
4,393,376
GROSS PROFIT
725,453
938,149
1,262,557
1,884,403
OPERATING EXPENSES
Selling, general and administrative expenses
651,141
591,670
1,000,020
1,055,758
Depreciation and amortization expenses
150,262
154,152
332,419
343,596
Total operating expenses
801,403
745,822
1,332,439
1,399,354
INCOME (LOSS) FROM OPERATIONS
(75,950
)
192,327
(69,882
)
485,049
OTHER INCOME/(EXPENSES)
Interest income
17,417
24,459
35,524
48,386
Interest expense
(26,855
)
(32,240
)
(58,479
)
(62,198
)
Other income/(expenses), net
11,856
(19,376
)
21,375
19,556
Total other income (expense), net
2,418
(27,157
)
(1,580
)
5,744
INCOME (LOSS) BEFORE INCOME TAXE
(73,532
)
165,170
(71,462
)
490,793
Provision for income taxes
38,477
58,359
70,883
160,538
NET INCOME (LOSS)
(112,009
)
106,811
(142,345
)
330,255
Less: net loss attributable to non-controlling interests
(2
)
-
(4
)
-
Net income (loss) attributable to China Health Industries Holdings
(112,007
)
106,811
(142,341
)
330,255
Foreign currency translation gain
(675,918
)
(399,185
)
(1,575,396
)
(8,441
)
Comprehensive income/(loss)
(787,927
)
(292,374
)
(1,717,741
)
321,814
Less: comprehensive loss attributable to non- controlling interests
(6
)
(3
)
(13
)
-
ATTRIBUTABLE TO CHINA HEALTH $
(787,921
)
$
(292,371
)
$
(1,717,728
)
$
321,814
Net income (loss) attributable to China
$
(0.002
)
$
0.002
$
(0.002
)
$
0.005
Weighted average shares outstanding:
65,539,737
62,239,737
65,539,737
62,239,737
Comments & Business Outlook
For the Three Months Ended
September 30, 2015
September 30, 2014
REVENUE
$
1,956,068
$
3,160,217
COST OF GOODS SOLD
1,418,964
2,213,963
GROSS PROFIT
537,104
946,254
OPERATING EXPENSES
Selling, general and administrative expenses
348,879
464,088
Depreciation and amortization expenses
182,157
189,444
Total operating expenses
531,036
653,532
INCOME FROM OPERATIONS
6,068
292,722
OTHER INCOME/(EXPENSES)
Interest income
18,107
23,927
Interest expense
(31,624
)
(29,958
)
Other income, net
9,519
38,932
Total other income (expense), net
(3,998
)
32,901
INCOME (LOSS) BEFORE INCOME TAXES
2,070
325,623
Provision for income taxes
32,406
102,179
NET INCOME (LOSS)
(30,336
)
223,444
Less: net loss attributable to non-controlling interests
(2
)
-
Net income (loss) attributable to China Health Industries Holdings
(30,334
)
223,444
Foreign currency translation gain
(899,478
)
390,744
Comprehensive income/(loss)
(929,814
)
614,188
Less: comprehensive income attributable to non-controlling interests
(7
)
3
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS
$
(929,807
)
$
614,185
Net income (loss) attributable to China Health Industries Holdings' shareholders per share are:
Basic & diluted income per share
$
(0.0005
)
$
0.0036
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
65,539,737
62,239,737
Management Discussion and Analysis
Total revenues decreased by $1,204,149, or 38.10%, for the three months ended September 30, 2015 as compared to the same period in 2014. The decrease in revenues was primarily due to a decrease of $1,090,031 or 39.60% in Humankind’s revenues and a decrease of $114,118 or 27.98% in HLJ Huimeijia’s revenues for the three months ended September 30, 2015 as compared to the same period in 2014. The reason for the decrease of the sales revenue was primary due to the contraction of China's health care products market and a 15 days leave for entire staff of Humankind during August 2015 for its regular annual production equipment maintenance.
Net loss was $30,336 for the three months ended September 30, 2015, as compared to net income of $223,444 for the three months ended September 30, 2014. This decrease of $253,780, or 113.58% in net income was primarily attributable to the decrease in revenues in the amount of $1,204,149, partially offset by a decrease in cost of goods sold of $773,582 and a decrease in selling, general and administrative expenses with an amount of $115,209.
Loss per share was $0.0005 for the three months ended September 30, 2015 and income per share was $0.0036 for the three months ended September 30, 2014. This decrease was primarily a result of the above decrease in net income.
Comments & Business Outlook
For the Year Ended
June 30, 2015
June 30, 2014
REVENUE $
10,226,052
$
9,709,099
COST OF GOODS SOLD
7,290,174
7,315,171
GROSS PROFIT
2,935,878
2,393,928
OPERATING EXPENSES
Selling, general and administrative expenses
2,123,459
1,970,482
Depreciation and amortization expenses
585,680
986,847
Research and development expenses
-
156,735
2,709,139
Total operating expenses
3,114,064
INCOME(LOSS) FROM OPERATIONS
226,739
(720,136
)
OTHER INCOME/(EXPENSES)
Interest income
97,432
111,810
Interest expense
(125,608
)
(111,758
)
Other income, net
38,851
61,557
Total other income, net
10,675
61,609
INCOME(LOSS) BEFORE INCOME TAXES
237,414
(658,527
)
Provision for income taxes
234,905
-
NET INCOME (LOSS)
2,509
(658,527
)
Less: net loss attributable to non-controlling interests
(52)
(60
)
Net income (loss) attributable to China Health Industries Holdings
2,561
(658,467
)
Foreign currency translation gain (loss)
20,582
(393,356
)
Comprehensive income (loss)
23,091
(1,051,883
)
Less: comprehensive loss attributable to non-controlling interests
51
(63
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS $
23,040
$
(1,051,820
)
Net loss attributable to China Health Industries Holdings' shareholders per share are:
Basic & diluted loss per share
$
(0.00
)
$
(0.01
)
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
63,044,395
62,239,737
Management Discussion and Analysis
Total revenues increased by $516,953, or 5.3%, for the year ended June 30, 2015 as compared to the same period in 2014. The increase in revenues was primarily due to an increase of $299,823 or 3.6% in Humankind’s revenues and an increase of $217,130 or 16.1% in HLJ Huimeijia’s revenues for the year ended June 30, 2015 as compared to the same period in 2014. The reason for the increase of the sales revenue with a decreasing sales volume in Humankind is that from November 2014 the sales price of Humankind’s primary product, Waterlilies Soft Capsule (Sailuozhi), was adjusted. For HLJ Huimeijia, the increased revenue was mainly due to the increased sales volume of its main products. The Company strives to expand the variety of its products and has purchased 12 new products from Guangzhou Aoda Biology Beauty Healthy Technology Co. Ltd in 2013. However, the majority of the 12 products were either under the review by the CFDA or in the process of Corporate Standard Registration, a backup registration not subject to the CFDA approval but subject to the CFDA’s monitor on the production after such a registration. The Company plans to accelerate the registration process and manufacture and release four to six new products to form a series of health-care products in the near future. The Company is also considering developing new sales areas by acquiring new distributors or exploring market for medical products in order to enhance the profits.
Net income was $2,509 for the year ended June 30, 2015, as compared to net loss of $658,527 for the year ended June 30, 2014. The increase of $661,036, or 100.4% in net income was primarily attributable to the increase in revenues in the amount of $516,953, the decrease in cost of goods sold in the amount of $34,631, the decrease in depreciation and amortization, and research and development expenses in the amount of $401,167 and $156,735 respectively, partially offset by the increase in general and administrative expense of $214,053, and income tax in the amount of $234,905.
Income per share was $0.00004 for the years ended June 30, 2015 and loss per share was $0.01 for the same period for 2014. This decrease was caused by the above mentioned decreases in net loss.
Comments & Business Outlook
For the Three Months Ended
For the Nine Months Ended
March 31,
March 31,
March 31,
March 31,
2015
2014
2015
2014
REVENUE
$
1,933,377
$
2,555,394
$
8,211,156
$
6,501,198
COST OF GOODS SOLD
1,403,081
1,781,580
5,796,457
5,030,815
GROSS PROFIT
530,296
773,814
2,414,699
1,470,383
OPERATING EXPENSES
Selling, general and administrative expenses
515,085
540,192
1,570,843
1,594,887
Depreciation and amortization expenses
173,083
42,684
516,679
587,283
Research and development expenses
-
47
-
157,552
Total operating expenses
688,168
582,923
2,087,522
2,339,722
INCOME (LOSS) FROM OPERATIONS
(157,872
)
190,891
327,177
(869,339
)
OTHER INCOME/(EXPENSES)
Interest income
24,479
23,644
72,865
87,746
Interest expense
(31,276
)
(40,277
)
(93,474
)
(84,280
)
Other income/(expenses), net
9,623
(38,810
)
29,179
(4,682
)
Total other income (expense), net
2,826
(55,443
)
8,570
(1,216
)
INCOME (LOSS) BEFORE INCOME TAXES
(155,046
)
135,448
335,747
(870,555
)
Provision for income taxes
25,754
-
186,292
-
NET INCOME (LOSS)
(180,800
)
135,448
149,455
(870,555
)
Less: net loss attributable to non-controlling interests
(18
)
1
(18
)
(70
)
Net income (loss) attributable to China Health Industries Holdings
(180,782
)
135,447
149,473
(870,485
)
Foreign currency translation gain
35,113
(970,760
)
26,672
(460,681
)
Comprehensive income/(loss)
(145,687
)
(835,312
)
176,127
(1,331,236
)
Less: comprehensive loss attributable to non- controlling interests
(36
)
(7
)
(36
)
(73
)
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS
$
(145,651
)
$
(835,305
)
$
176,163
$
(1,331,163
)
Net income (loss) attributable to China Health Industries Holdings' shareholders per share are:
Basic & diluted income (loss) per share
$
(0.003
)
$
0.002
$
0.002
$
(0.014
)
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737
62,239,737
62,239,737
62,239,737
Management Discussion and Analysis
Revenue
Total revenues decreased by $622,017, or 24.34%, for the three months ended March 31, 2015 as compared to the same period in 2014. The decrease in revenues was primarily due to a decrease of $716,712 or 30.81% in Humankind’s revenues, and partially offset by an increase of $94,695 or 41.26% in HLJ Huimeijia’s revenues for the three months ended March 31, 2015 as compared to the same period in 2014. The reason for the decrease of the sales revenue in Humankind was due to the decrease in average sales price and sales volume. The average unit sale prices to the agents of Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule were decreased from $67.6 to $65.2 and from $30.6 to $29.3, for the three months ended March 31, 2015 and 2014, respectively. The sales volume in Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule decreased 5,659 and 8,832 boxes for the three months ended March 31, 2015 as compared to the same period in 2014, respectively, this decrease was caused by the loss of a small amount of customers who were not satisfied with the Company’s product portfolio as currently the Humankind only sells two products, Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule. The Company strives to expand the variety of its products and has purchased 12 new products from Guangzhou Aoda Biology Beauty Healthy Technology Co. Ltd in 2013. However, the majority of the 12 products were either under the review by the CFDA or in the process of Corporate Standard Registration, a backup registration not subject to the CFDA approval but subject to the CFDA’s monitor on the production after such a registration. The Company plans to accelerate the registration process and manufacture and release four to six new products to form a series of health-care products in the near future. The Company is also considering to develop new sales areas by acquiring new distributors or explore market for medical products in order to enhance the profits. The increase of the sales revenue in HLJ Huimeijia was mainly due to an increase in the total number of wholesale customers we served for the three months ended March 31, 2015.
Net loss was $180,800 for the three months ended March 31, 2015, as compared to net income of $135,448 for the three months ended March 31, 2014. This decrease of $316,248, or 233.48% in net income was primarily attributable to the decrease in revenues in the amount of $622,017, the increase in operating expense in the amount of $105,245, and the increase in the income tax of $25,754, partially offset by the decrease in cost of goods sold of $378,499.
Loss per share was $0.003 for the three months ended March 31, 2015 and income per share was $0.002 for the three months ended March 31, 2014. This decrease was primarily a result of the above increase in net loss.
Deal Flow
Item 1.01 Entry into a Material Definitive Agreement.
On February 9, 2015, the four parties entered into a supplementary agreement (the “Supplementary Agreement”) to modify the terms of the Agreement, pursuant to which, the Equity Holders and Huimeijia (collectively the “Assets Transferors”) shall only sell 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 will retain the equity interests in Huimeijia, but will have the equity interests pledged to Xiuzheng Pharmacy until the Assets are transferred, at which time all the cash consideration shall be paid by the Buyer. The total cash consideration remains to be the same as under the Agreement, i.e., RMB 8,000,000 (approximately $1,306,186) to the Assets Transferors.
Comments & Business Outlook
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
For the Three Months Ended
For the Six Months Ended
December 31,
December 31,
December 31,
December 31,
2014
2013
2014
2013
REVENUE $
3,117,562
$
2,256,286
$
6,277,779
$
3,945,804
COST OF GOODS SOLD
2,179,413
1,717,795
4,393,376
3,249,235
GROSS PROFIT
938,149
538,491
1,884,403
696,569
OPERATING EXPENSES
Selling, general and administrative expenses
591,670
520,003
1,055,758
1,054,695
Depreciation and amortization expenses
154,152
319,395
343,596
544,599
Research and development expenses
-
445
-
157,505
Total operating expenses
745,822
839,843
1,399,354
1,756,799
INCOME (LOSS) FROM OPERATIONS
192,327
(301,352
)
485,049
(1,060,230
)
OTHER INCOME/(EXPENSES)
Interest income
24,459
24,808
48,386
64,102
Interest expense
(32,240
)
(21,223
)
(62,198
)
(44,003
)
Other income(expenses), net
(19,376
)
9,737
19,556
34,128
Total other income (expense), net
(27,157
)
13,322
5,744
54,227
INCOME (LOSS) BEFORE INCOME TAXES
165,170
(288,030
)
490,793
(1,006,003
)
Provision for income taxes
58,359
-
160,538
-
NET INCOME (LOSS)
106,811
(288,030
)
330,255
(1,006,003
)
Less: net loss attributable to non-controlling interests
-
(71
)
-
(71
)
Net income (loss) attributable to China Health Industries Holdings
106,811
(287,959
)
330,255
(1,005,932
)
Foreign currency translation gain
(399,185
)
357,213
(8,441
)
509,545
Comprehensive income(loss)
(292,374
)
69,183
321,814
(496,458
)
Less: comprehensive loss attributable to non- controlling interests
(3
)
(67
)
-
(66
)
COMPREHENSIVE INCOME(LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS $
(292,371
)
$
69,250
$
321,814
$
(496,392
)
Net income (loss) attributable to China Health
Industries Holdings' shareholders per share are:
Basic & diluted income (loss) per share
$
(0.002
)
$
(0.010
)
$
0.005
$
(0.020
)
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737
62,239,737
62,239,737
62,239,737
Management Discussion and Analysis
Revenue
Total revenues increased by $861,276, or 38.17%, for the three months ended December 31, 2014 as compared to the same period in 2013. The increase in revenues was primarily due to an increase of $753,708 or 41.66% in Humankind’s revenues and an increase of $107,568 or 24.05% in HLJ Huimeijia’s revenues for the three months ended December 31, 2014 as compared to the same period in 2013. The reason for the increase of the sales revenue in Humankind was due to the enhanced sales price and the increase in sales volume. From November 2013 the sales discounts rate of two primary products were adjusted. The unit sale prices to the agents of Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule were adjusted from $47.6 to $66.8 and from $23.6 to $29.8, respectively. The sales volume increase was attributable to the Company’s greater efforts in generating publicity for the three months ended December 31, 2014.
Net income was $106,811 for the three months ended December 31, 2014, as compared to net loss of $288,030 for the three months ended December 31, 2013. This increase of $394,841, or 137.08% in net income was primarily attributable to the increase in revenues in the amount of $861,276, the decrease in operating expense in the amount of $94,021, partially offset by the increase in cost of goods sold of $461,618 and the increase in the income tax of $58,359.
Income per share was $0.002 for the three months ended December 31, 2014 and loss per share was $0.010 for the three months ended December 31, 2013. This increase was primarily a result of the above increase in net income.
Auditor trail
Item 4.01. Changes in Registrant’s Certifying Accountant.
The principal accountant’s reports of KCCW on the financial statements of the Company as of and for the fiscal years ended June 30, 2014 and 2013 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company’s two most recent fiscal years and the subsequent interim period through January 16, 2015, there were no disagreements with KCCW on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s) if not resolved to KCCW’s satisfaction would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report. During the Company’s two most recent fiscal years and the subsequent interim period through January 16, 2015, there were no reportable events of the type described in Item 304(a)(1)(v) of Regulation S-K.
The Company provided KCCW with a copy of the foregoing disclosure and requested KCCW to furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made therein. A copy of such letter, dated January 22, 2015, furnished by KCCW, is filed as Exhibit 16.1 to this Form 8-K.
On January 16, 2015, the Company’s sole director approved the engagement of CANUSWA ACCOUNTING & TAX SERVICES INC. (“CANUSWA”) as the Company’s new independent registered public accounting firm.
During the Company’s two most recent fiscal years and the subsequent interim period through January 16, 2015, neither the Company nor anyone on its behalf consulted with CANUSWA regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; the type of audit opinion that might be rendered on the Company's financial statements, and neither a written report nor oral advice was provided that CANUSWA concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and its related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Disposal of Assets
Item 1.01 Entry into a Material Definitive Agreement.
The transfer of the 100% equity interests of Huimeijia to Xiuzheng is for a total cash consideration of RMB 8,000,000 (approximately $1,306,186) (the “Purchase Price”) to Humankind and Mr. Xin Sun. 40% of the Purchase Price is due within 10 business days after signing the Agreement; 40% of the Purchase Price is due within 10 business days after the completion of the changes in business registration and Xiuzheng obtains the newly issued documents evidencing its ownership on Huimeijia; 15% of the Purchase Price is due within 10 business days after the transfer of all the drugs is approved by Heilongjiang FDA; and 5% of the Purchase Price is due within 10 business days after all the drugs have been transferred to Xiuzheng or its designated entity and Humankind and Mr. Xin Sun instruct Xiuzheng to complete three-batches production of all forms of drugs.
The assets of Huimeijia subject to this transfer are all movable property, including but not limited to, 19 drug approval numbers of tablet, capsule, powder, mixture, oral liquid, syrup and oral solution, 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 production and operation of drugs. The Agreement scope shall not cover the fixed assets, including but not limited to cash, plant, equipment and land, claims and liabilities, tax and administration fees, various account receivables and account payables related to Huimeijia.
There are no relationships between the Company, any of their affiliates, any director or officer of the Company, or any associate of any such director or officer, and Xiuzheng, or any of its affiliates.
Deal Flow
Item 1.01 Entry into a Material Definitive Agreement.
The transfer of the 100% equity interests of Huimeijia to Xiuzheng is for a total cash consideration of RMB 8,000,000 (approximately $1,306,186) (the “Purchase Price”) to Humankind and Mr. Xin Sun. 40% of the Purchase Price is due within 10 business days after signing the Agreement; 40% of the Purchase Price is due within 10 business days after the completion of the changes in business registration and Xiuzheng obtains the newly issued documents evidencing its ownership on Huimeijia; 15% of the Purchase Price is due within 10 business days after the transfer of all the drugs is approved by Heilongjiang FDA; and 5% of the Purchase Price is due within 10 business days after all the drugs have been transferred to Xiuzheng or its designated entity and Humankind and Mr. Xin Sun instruct Xiuzheng to complete three-batches production of all forms of drugs.
The assets of Huimeijia subject to this transfer are all movable property, including but not limited to, 19 drug approval numbers of tablet, capsule, powder, mixture, oral liquid, syrup and oral solution, 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 production and operation of drugs. The Agreement scope shall not cover the fixed assets, including but not limited to cash, plant, equipment and land, claims and liabilities, tax and administration fees, various account receivables and account payables related to Huimeijia.
Comments & Business Outlook
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
For the Three Months Ended
September 30, 2014
September 30, 2013
REVENUE
$
3,160,217
$
1,689,518
COST OF GOODS SOLD
2,213,963
1,531,440
GROSS PROFIT
946,254
158,078
OPERATING EXPENSES
Selling, general and administrative expenses
464,088
532,309
Depreciation and amortization expenses
189,444
227,587
Research and development expenses
-
157,060
Total operating expenses
653,532
916,956
INCOME (LOSS) FROM OPERATIONS
292,722
(758,878
)
OTHER INCOME/(EXPENSES)
Interest income
23,927
39,294
Interest expense
(29,958
)
(22,780
)
Other income, net
38,932
24,391
Total other income, net
32,901
40,905
INCOME (LOSS) BEFORE INCOME TAXES
325,623
(717,973
)
Provision for income taxes
102,179
-
NET INCOME (LOSS)
223,444
(717,973
)
Less: net loss attributable to non-controlling interests
-
-
Net income (loss) attributable to China Health Industries Holdings
223,444
(717,973
)
Foreign currency translation gain
390,744
106,007
Comprehensive income/(loss)
614,188
(611,966
)
Less: comprehensive income attributable to non-controlling interests
3
1
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS
$
614,185
$
(611,967
)
Net income (loss) attributable to China Health Industries Holdings' shareholders per share are:
Basic & diluted income (loss) per share
$
0.004
$
(0.010
)
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737
62,239,737
Management Discussion and Analysis
Revenue
Total revenues increased by $1,470,699, or 87.05%, for the three months ended September 30, 2014 as compared to the same period in 2013. The increase in revenues was primarily due to an increase of $1,366,559 or 98.61% in Humankind’s revenues and an increase of $104,140 or 34.29% in HLJ Huimeijia’s revenues for the three months ended September 30, 2014 as compared to the same period in 2013. The reason for the increase of the sales revenue in Humankind was due to the enhanced sales price and the increase in sales volume. From November 2013 the sales discounts of two primary products were adjusted. The unit sale prices to the agents of Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule were adjusted from $47.6 to $66.8 and from $23.6 to $29.8, respectively. The sales volume increase was attributable to the company’s greater efforts in generating publicity for the three months ended September 30, 2014.
Net income was $223,444 for the three months ended September 30, 2014, as compared to net loss of $717,973 for the three months ended September 30, 2013. This increase of $941,417, or 131.1% in net income was primarily attributable to the increase in revenues in the amount of $1,470,699, the decrease in research and development expense in the amount of $157,060, partially offset by the increase in cost of goods sold of $682,523.
Income per share was $0.004 for the three months ended September 30, 2014 and loss per share was $0.010 for the three months ended September 30, 2013. This increase was primarily a result of the above increase in net income.
Comments & Business Outlook
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Audited)
For the Years Ended
June 30, 2014
June 30, 2013
REVENUE
$
9,709,099
$
8,995,653
COST OF GOODS SOLD
7,315,171
7,732,283
GROSS PROFIT
2,393,928
1,263,370
OPERATING EXPENSES
Selling, general and administrative expenses
1,970,482
1,887,537
Depreciation and amortization expenses
986,847
279,330
Research and development expenses
156,735
444,945
Total operating expenses
3,114,064
2,611,812
LOSS FROM OPERATIONS
(720,136
)
(1,348,442
)
OTHER INCOME/(EXPENSES)
Interest income
111,810
247,642
Interest expense
(111,758
)
(121,703
)
Other income/(expenses), net
61,557
(281
)
Total other expenses, net
61,609
125,658
LOSS BEFORE INCOME TAXES
(658,527
)
(1,222,784
)
Provision for income taxes
-
23,932
NET LOSS
(658,527
)
(1,246,716
)
Less: net loss attributable to non-controlling interests
(60
)
(188
)
Net loss attributable to China Health Industries Holdings
(658,467
)
(1,246,528
)
Foreign currency translation gain (loss)
(393,356
)
1,294,453
Comprehensive income (loss)
(1,051,883
)
47,737
Less: comprehensive loss attributable to non-controlling interests
(63
)
(174
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS
$
(1,051,820
)
$
47,911
Net loss attributable to China Health Industries Holdings' shareholders per share are:
Basic & diluted loss per share
$
(0.01
)
$
(0.02
)
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737
62,239,737
Management Discussion and Analysis
Revenue
Total revenues increased by $713,446, or 7.9%, for the year ended June 30, 2014 as compared to the same period in 2013. The increase in revenues was primarily due to an increase of $629,382 or 8.1% in Humankind’s revenues and an increase of $84,064 or 6.6% in HLJ Huimeijia’s revenues for the year ended June 30, 2014 as compared to the same period in 2013. The reason for the increase of the sales revenue with a decreasing sales volume is that from November 2013 the sales discounts of two primary products were adjusted. The unit sale prices to the agents of Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule were adjusted from $41.8 to $62.7 and from $20.1 to $27.6, respectively.
Net loss was $658,527 for the year ended June 30, 2014, as compared to net loss of $1,246,716 for the year ended June 30, 2013. This decrease of $564,257, or 46.1% in net loss was primarily attributable to the increase in revenues in the amount of $713,446, the decrease in cost of goods sold in the amount of $417,112, the decrease in research and development expense in the amount of $288,210, partially offset by the increase in selling, general and administrative expense of $82,945, the increase in depreciation and amortization expense of $707,517, and the decrease in interest income in the amount of $135,832.
Loss per share was $0.01 and $0.02 for the years ended June 30, 2014 and 2013 respectively. This decrease was primarily a result of the above decrease in net loss.
Comments & Business Outlook
For the Three Months Ended
For the Nine Months Ended
March 31,
March 31,
March 31,
March 31,
REVENUE
$
2,555,394
$
2,725,308
$
6,501,198
$
6,882,237
COST OF GOODS SOLD
1,781,580
2,514,732
5,030,815
5,752,659
GROSS PROFIT
773,814
210,576
1,470,383
1,129,578
OPERATING EXPENSES
Selling, general and administrative expenses
540,192
353,995
1,594,887
1,561,247
Depreciation and amortization expenses
42,684
48,914
587,283
255,066
Research and development expenses
47
120,491
157,552
358,658
Total operating expenses
582,923
523,400
2,339,722
2,174,971
INCOME (LOSS) FROM OPERATIONS
190,891
(312,824
)
(869,339
)
(1,045,393
)
OTHER INCOME (EXPENSES)
Interest income
23,644
66,951
87,746
190,490
Interest expense
40,277
22,164
84,280
99,214
Other expenses, net
38,810
48
4,682
166
Total other income (expenses), net
(55,443
)
44,739
(1,216
)
91,110
INCOME (LOSS) BEFORE INCOME TAXES
135,448
(268,085
)
(870,555
)
(954,283
)
Provision for income taxes
-
93
-
23,816
NET INCOME (LOSS)
135,448
(268,178
)
(870,555
)
(978,099
)
Less: net income (loss) attributable to non-controlling interests
1
(47
)
(70
)
(166
)
Net income (loss) attributable to China Health Industries Holdings
135,447
(268,131
)
(870,485
)
(977,933
)
Foreign currency translation gain (loss)
(970,760
)
116,732
(460,681
)
847,865
Comprehensive income (loss)
(835,312
)
(151,446
)
(1,331,236
)
(130,234
)
Less: comprehensive income (loss) attributable to non-controlling interests
(7
)
(45
)
(73
)
(156
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS
$
(835,305
)
$
(151,401
)
$
(1,331,163
)
$
(130,078
)
Net loss attributable to China Health Industries Holdings' shareholders per share are:
Basic & diluted loss per share
$
-
$
-
$
(0.01
)
$
(0.02
)
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737
62,239,737
62,239,737
62,239,737
Management Discussion and Analysis
Revenue
Total revenues decreased by $169,914, or 6.23%, for the three months ended March 31, 2014 as compared to the same period in 2013. The decrease in revenues was primarily due to a decrease of $153,779 or 6.20% in Humankind’s revenues and a decrease of $16,135 or 6.57% in HLJ Huimeijia’s revenues for the three months ended March 31, 2014 as compared to the same period in 2013. The decrease in revenues was mainly attributable to the decrease in sales volume as compared to the same period in 2013.
Our total cost of sales decreased $733,152 or 29.15% for the three months ended March 31, 2014 as compared to the same period in 2013. The decrease in cost of sales was primarily due to a decrease of $712,485 or 30.90% in Humankind’s cost of sales and a decrease of $20,667 or 9.89% in HLJ Huimeijia’s cost of sales for the three months ended March 31, 2014 as compared to the same period in 2013. The decrease in cost of sales was mainly a result of the decrease in sales volume.
Our gross margin increased 22.55%, from 7.73% for the three months ended March 31, 2013 to 30.28% for the three months ended March 31, 2014. This increase was attributable to the increase in Humankind’s sale prices since November 2013. The sales price for the Waterlilies Soft Capsule (Sailuozhi) increased 40%, and the sales price for the Propolis and Black Ant Capsule increased 31%, compared to the same period in 2013.
Net income was $135,448 for the three months ended March 31, 2014, as compared to loss of $21,336 for the three months ended March 31, 2013. This increase of $156,784, or 734.83%, in net income was primarily attributable to the decrease in cost of goods sold in the amount of $666,080, partially offset by the increase in general and administrative expense in the amount of $242,382.
Loss per share was $0.00 and $0.00 for the three months ended March 31, 2014 and 2013 respectively.
Comments & Business Outlook
(Unaudited)
For the Three Months Ended
For the Six Months Ended
December
December
December
December
REVENUE
$
2,256,286
$
2,430,997
$
3,945,804
$
4,156,929
COST OF GOODS SOLD
1,717,795
1,914,931
3,249,235
3,237,927
GROSS PROFIT
538,491
516,066
696,569
919,002
OPERATING EXPENSES
Selling, general and administrative expenses
520,003
641,181
1,054,695
1,207,252
Depreciation and amortization expenses
319,395
161,817
544,599
206,152
Research and development expenses
445
120,086
157,505
238,167
Total operating expenses
839,843
923,084
1,756,799
1,651,571
LOSS FROM OPERATIONS
(301,352)
(407,018)
(1,060,230)
(732,569)
OTHER INCOME (EXPENSES)
Interest income
24,808
62,035
64,102
123,539
Interest expense
(21,223)
(32,517)
(44,003)
(77,050)
Other income (expense), net
9,737
(79)
34,128
(118)
Total other income, net
13,322
29,439
54,227
46,371
LOSS BEFORE INCOME TAXES
(288,030)
(377,579)
(1,006,003)
(686,198)
Provision for income taxes
-
15,980
-
23,723
NET LOSS
(288,030)
(393,559)
(1,006,003)
(709,921)
Net loss attributable to noncontrolling interests
(71)
(71)
(71)
(119)
Net loss attributable to China Health Industries Holdings
(287,959)
(393,488)
(1,005,932)
(709,802)
Foreign currency translation gain
357,213
131,808
509,545
731,133
Comprehensive income (loss)
69,183
(261,751)
(496,458)
21,212
Less: comprehensive loss attributable to noncontrolling interests
(67)
(68)
(66)
(111)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHINA HEALTH INDUSTRIES HOLDINGS
$
69,250
$
(261,683)
$
(496,392)
$
21,323
Net loss attributable to China Health Industries Holdings' shareholders per share are
Basic and diluted loss per share
$
(0.01)
$
(0.01)
$
(0.02)
$
(0.01)
Weighted average shares outstanding:
Basic and diluted weighted average shares outstanding
62,239,737
62,239,737
62,239,737
62,239,737
Management Discussion and Analysis
Results of Operations
Revenuedecreased by $174,711 or 7.19% for the three months ended December 31, 2013 as compared to the same period in 2012. The decrease in revenues was primarily due to a decrease of $196,856, or 9.81% in Humankind for the three months ended December 31, 2013 as compared to the same period in 2012, partially offset by an increase of $22,415 or 5.21% in HLJ Huimeijia. The decrease in Humankind was mainly attributable to the decrease in sales volume as compared to the same period in 2012.cost of sales decreased $197,136 or 10.29% for the three months ended December 31, 2013 as compared to the same period in 2012. The decrease in cost of sales was primarily due to the Humankind’s cost of sales decreased by $239,526, or 14.63%, for the three months ended December 31, 2013 as compared to the same period in 2012, partially offset by an increase of $42,390 or 15.28% in HLJ Huimeijia. The decrease in Humankind was mainly a result of the decrease in sales volume. gross margin increased 2.64% from 21.23% for the three months ended December 31, 2012 to 23.87% for the three months ended December 31, 2013. This increase was attributable to the sale prices increasing in Humankind since November 2013. For the Waterlilies Soft Capsule (Sailuozhi), the sales price increased 4% and for the Propolis and Black Ant Capsule, the sales price increased 21% compared to the same period in 2012.
Net Loss and Loss Per ShareNet loss was $288,030 for the three months ended December 31, 2013, as compared to $393,559 for the three months ended December 31, 2012. This decrease of $105,529 or 26.81% in net loss was primarily attributable to the decrease in operating expenses in the amount of $83,241. Loss per share was $0.01 and $0.01 for the three months ended December 31, 2013 and 2012 respectively, which remained stable.
Auditor trail
Item 4.01. Changes in Registrant’s Certifying Accountant.
On July 15, 2013, China Health Industries Holdings, Inc., a corporation incorporated under the laws of the State of Delaware (the “Company ”) dismissed De Joya Griffith & Company, LLC (“ De Joya ”) as the Company’s independent registered public accounting firm. The decision to dismiss De Joya was approved by the Company’s sole director.
The principal accountant’s report of De Joya on the financial statements of the Company as of and for the fiscal year ended June 30, 2011 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. The Company’s audit for the fiscal year ended June 30, 2012 has not yet been commenced. De Joy was engaged by the Company effective June 24, 2011.
During the Company’s two most recent fiscal years and the subsequent interim period through July 15, 2013, there were no disagreements with De Joya on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to De Joya’s satisfaction would have caused it to make reference thereto in connection with its report. During the Company’s two most recent fiscal years and the subsequent interim period through July 15, 2013, there were no reportable events of the type described in Item 304(a)(1)(v) of Regulation S-K.
The Company provided De Joya with a copy of the foregoing disclosure and requested De Joya to furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made therein. A copy of such letter, dated July 18, 2013, furnished by De Joya, is filed as Exhibit 16.1 to this Form 8-K.
On July 15, 2013, the Company’s sole director approved the engagement of KCCW Accountancy Corp. (“ KCCW ”) as the Company’s independent registered public accounting firm to audit its financial statements for the fiscal years ended June 30, 2013 and 2012.
During the Company’s two most recent fiscal years and the subsequent interim period through July 15, 2013, neither the Company nor anyone on its behalf consulted with KCCW regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; the type of audit opinion that might be rendered on the Company's financial statements, and neither a written report nor oral advice was provided that KCCW concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Comments & Business Outlook
For the Three Months Ended
For the Nine Months Ended
March 31, 2012
March 31, 2011
March 31, 2012
March 31, 2011
REVENUE
11,250,503
16,681,724
56,164,111
41,662,210
COST OF GOODS SOLD
6,406,449
8,918,379
33,777,650
21,611,710
GROSS PROFIT
4,844,054
7,763,345
22,386,461
20,050,500
OPERATING EXPENSES
Selling, general & administrative expenses
566,849
1,069,847
3,442,839
3,558,266
Depreciation and amortization expenses
51,414
20,958
81,975
60,754
Research & development
120,152
602,860
360,200
1,374,403
Total operating expenses
738,415
1,693,665
3,885,014
4,993,423
INCOME FROM OPERATIONS
4,105,639
6,069,680
18,501,447
15,057,077
OTHER INCOME (EXPENSES)
Interest income
82,860
62,905
232,776
141,542
Interest expense
(6,907
)
(1,195
)
(20,602
)
(3,531
)
Total other income
75,953
61,710
212,174
138,011
INCOME BEFORE INCOME TAXES
4,181,592
6,131,390
18,713,621
15,195,088
Provision for income taxes
550,167
1,730,671
4,588,768
4,394,107
NET INCOME
$
3,631,425
$
4,400,719
$
14,124,853
$
10,800,981
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss)
(6,373
)
1,728,002
1,158,748
1,929,003
Total comprehensive income
$
3,625,052
$
6,128,721
$
15,283,601
$
12,729,984
Earning per share:
Basic & diluted earning per share
$
0.06
$
0.07
$
0.23
$
0.17
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737
62,239,737
62,239,737
62,239,737
Total revenues decreased by $5,431,221, or 33%, to $11,250,503 for the three months ended March 31, 2012 compared to $16,681,724 for the same period in 2011. The decrease in revenues was attributable to the decrease in product sales. According to the current PRC Health Food and Supplement Policy promulgated in 2010 (“Policy”), certification issued by provincial Food and Drug Administration cannot be renewed after expiration. Only certification issued by State Food and Drug Administration can be renewed and only products with State certification are allowed on the market. Among the seven products Humankind previously sold on the market, only Waterlilies Soft Capsule (Sailuozhi) was certified by State Food and Drug Administration. The other six products were certified by provincial Food and Drug Administration and the certifications will expire in May 2012. In order to reduce operational risks, the Company ceased the production of four health products with provincial certification in the quarter ended March 31, 2012. Currently, we only sell Waterlilies Soft Capsule (Sailuozhi), Colon Cleanser Capsule and Virility Max Capsule. In accordance with the Policy, despite expiration of State certification, the product is still allowed on the market so long as the product is within its usage expiration date.
2012 Outlook:
We anticipate our total revenues in 2012 versus 2011 to decrease by 7.64% to 10.83% or approximately $4.8 million to $6.8 million. Our gross profit margin in 2012 is expected to be approximately 40% due to an increase in raw material costs resulting from inflation. We estimate our overall 2012 net profit margin to be approximately 24%. However, there is no assurance that these predictions will be reached.
Previous 2012 outlook:
We anticipate our total revenues in 2012 versus 2011 to increase by 20% or approximately $12.5 million with growth in all categories of our product sales. Our gross profit margin in 2012 is expected to be approximately 47% due to increase in raw material costs resulting from inflation. We estimate our overall 2012 net profit margin to be approximately 26%
Investor Alert
According to the current PRC Health Food and Supplement Policy promulgated in 2010 (“Policy”), certification issued by provincial Food and Drug Administration cannot be renewed after expiration. Only certification issued by State Food and Drug Administration can be renewed and only products with State certification are allowed on the market. Among the seven products Humankind previously sold on the market, only Waterlilies Soft Capsule (Sailuozhi) was certified by State Food and Drug Administration. The other six products were certified by provincial Food and Drug Administration and the certifications will expire in May 2012. In order to reduce operational risks, the Company
ceased the production of four health products with provincial certification in the quarter ended March 31, 2012. Currently, we only sell Waterlilies Soft Capsule (Sailuozhi), Colon Cleanser Capsule and Virility Max Capsule. In accordance with the Policy, despite expiration of State certification, the product is still allowed on the market so long as the product is within its usage expiration date.
Comments & Business Outlook
For the Three Months Ended
For the Six Months Ended
December 31, 2011
December 31, 2010
December 31, 2011
December 31, 2010
REVENUE
23,973,612
13,363,093
46,167,138
24,980,486
COST OF GOODS SOLD
14,401,135
6,708,036
27,371,201
12,693,331
GROSS PROFIT
9,572,477
6,655,057
18,795,937
12,287,155
OPERATING EXPENSES
Selling, general & administrative
2,286,370
1,227,027
4,129,519
2,488,419
Depreciation and amortization
15,862
20,099
30,561
39,796
Research & development
120,024
34,115
240,048
771,543
Total operating expenses
2,422,256
1,281,241
4,400,128
3,299,758
INCOME FROM OPERATIONS
7,150,221
5,373,816
14,395,809
8,987,397
OTHER INCOME
Interest income
76,778
39,282
149,916
78,637
Interest expense
(6,595
)
(1,168
)
(13,695
)
(2,336
)
Total other income
70,183
38,114
136,221
76,301
INCOME BEFORE INCOME TAXES
7,220,404
5,411,930
14,532,030
9,063,698
Provision for income taxes
2,041,873
1,548,022
4,038,601
2,663,436
NET INCOME
$
5,178,531
$
3,863,908
$
10,493,429
$
6,400,262
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss)
631,937
(23,552
)
1,165,121
201,001
Total other comprehensive income
$
5,810,468
$
3,840,356
$
11,658,550
$
6,601,263
Earning per share:
Basic & diluted earning per share
$
0.08
$
0.06
$
0.17
$
0.10
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737
62,239,737
62,239,737
62,239,737
The increase in revenues was attributable to growth in product sales. This growth in product sales was attributable to increase in sales volume resulting from our efforts to continue to develop our distribution channels by hiring additional sales agents to ensure that our products and their benefits are introduced to those making or influencing the purchasing decisions.
2012 Outlook
We anticipate our total revenues in 2012 versus 2011 to increase by 20% or approximately $12.5 million with growth in all categories of our product sales. Our gross profit margin in 2012 is expected to be approximately 47% due to increase in raw material costs resulting from inflation. We estimate our overall 2012 net profit margin to be approximately 26%
Liquidity Requirements
Plan of Operation
We will continue to focus on the expansion of our operation, development of new products and increase new customers. Additionally, we are putting more effort to develop our distribution channels by hiring more sales agents and sales people. We presently have enough liquidity to meet our expansion plans. However, depending on growth, the Company may need additional funding in the future.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Audited)
For the Year Ended
June 30, 2011
June 30, 2010
REVENUE
62,779,978 43,105,972
COST OF GOODS SOLD
33,335,334 20,160,420
GROSS PROFIT
29,444,644 22,945,552
OPERATING EXPENSES
Selling, general & administrative expenses
6,000,090 5,399,736
Depreciation and amortization expenses
46,578 79,388
Total operating expenses
6,046,668 5,479,124
INCOME FROM OPERATIONS
23,397,976 17,466,428
OTHER INCOME (EXPENSES)
Interest income
227,837 226,536
Interest expense
(27,317 ) (20,580 )
Other income
29,254
Total other income (expenses)
200,520 235,210
INCOME BEFORE INCOME TAXES
23,598,496 17,701,638
Provision for income taxes
5,924,501 4,447,467
NET INCOME
$ 17,673,995 $ 13,254,171
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain
1,421,363 327,761
Total other comprehensive income
$ 19,095,358 $ 13,581,932
Earning per share:
Basic & diluted earning per share
$ 0.28 $ 0.21
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737 62,239,737
GeoTeam ® Note : Fourth Quarter 2011 vs. 2010 EPS was $0.11 vs. $0.05
2012 Outlook We anticipate our total revenues in 2012 versus 2011 to increase by 20% or approximately $12.5 million with growth in all categories of our product sales. Our gross profit margin in 2012 is expected to be approximately 47% due to increased raw material costs resulting from inflation. We estimate our overall 2012 net profit margin to be approximately 26%. However, there is no assurance that these predictions will be reached.
Liquidity Requirements
We believe our current working capital position; together with our expected future cash flows from operations
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.
Comments & Business Outlook
For the Three Months Ended
For the Nine Months Ended
March 31, 2011
March 31, 2010
March 31, 2011
March 31, 2010
REVENUE
16,681,724 9,889,459 41,662,210 29,511,002
COST OF GOODS SOLD
8,918,379 4,540,126 21,611,710 13,061,854
GROSS PROFIT
7,763,345 5,349,333 20,050,500 16,449,148
OPERATING EXPENSES
Selling, general & administrative expenses
1,069,847 946,960 3,558,266 3,462,505
Depreciation and amortization expenses
20,958 20,716 60,754 77,012
Research & development
602,860 - 1,374,403 -
Total operating expenses
1,693,665 967,676 4,993,423 3,539,517
INCOME FROM OPERATION
6,069,680 4,381,657 15,057,077 12,909,631
OTHER INCOME (EXPENSES)
Interest income
62,905 226,482 141,542 226,487
Interest expenses
(1,195 ) (3,845 ) (3,531 ) (24,680 )
Total other income (expenses)
61,710 222,637 138,011 201,807
INCOME BEFORE INCOME TAXES
6,131,390 4,604,294 15,195,088 13,111,438
Provision for income taxes
1,730,671 1,140,243 4,394,107 3,289,639
NET INCOME
4,400,719 3,464,051 10,800,981 9,821,799
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain(loss)
1,728,002 (1,870 ) 1,929,003 183,227
Total other comprehensive income
$ 6,128,721 $ 3,462,181 $ 12,729,984 $ 10,005,026
Earning per share:
Basic & diluted earning per share
$ 0.07 $ 0.06 $ 0.17 $ 0.16
Weighted average shares outstanding:
Basic & diluted weighted average shares outstanding
62,239,737 62,239,737 62,239,737 62,239,737
2011 Outlook
We anticipate our total revenues in 2011 versus 2010 to increase by 40% or approximately $17.2 million with growth in all categories of our product sales. Our gross profit margin in 2011 is expected to be approximately 53% due to increased raw material costs resulting from inflation. We estimate our overall 2011 net profit margin to be approximately 28%. However, there is no assurance that these predictions will be reached.
Auditor trail
On March 23, 2011 , the board of directors of China Health Industries Holdings, Inc. (hereinafter referred to as “we,” “us,” “our,” or the “Company”) dismissed E-Fang Accountancy Corp. & CPA (“E-Fang”) as our independent registered public accounting firm and appointed Windes & McClaughry Accountancy Corporation (“Windes”) as our new independent registered public accounting firm. The decision to appoint Windes as our new independent registered public accounting firm was approved by our board of directors on March 23, 2011.
Comments & Business Outlook
CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
For the Three Months Ended
For the Six Months Ended
December
31, 2010
December
31, 2009
December
31, 2010
December
31, 2009
REVENUE
$ 13,363,093 $ 9,374,937 $ 24,980,486 $ 19,621,543
COST OF GOODS SOLD
6,708,036 4,035,362 12,693,331 8,521,728
Gross Profit
6,655,057 5,339,575 12,287,155 11,099,815
OPERATING EXPENSES
Selling, general & administrative expenses
1,227,027 1,999,220 2,488,419 2,515,545
Depreciation and amortization expenses
20,099 35,965 39,796 56,296
Research & development
34,115 - 771,543 -
Total operating expenses
1,281,241 2,035,185 3,299,758 2,571,841
Operating profit
5,373,816 3,304,390 8,987,397 8,527,974
OTHER INCOME (EXPENSES)
Interest expenses
(1,168 ) (4,936 ) (2,336 ) (20,835 )
Interest income
39,282 - 78,637 5
Other income
- - - -
Total other income (expense)
38,113 (4,936 ) 76,300 (20,830 )
INCOME (LOSS) BEFORE INCOME TAXES
5,411,930 3,299,454 9,063,698 8,507,144
Income taxes
1,548,022 831,363 2,663,436 2,149,396
Net income (loss)
$ 3,863,908 $ 2,468,091 $ 6,400,262 $ 6,357,748
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss)
$ (23,552 ) $ 642 $ 201,001 $ 185,097
Comprehensive income
$ 3,840,356 $ 2,468,733 $ 6,601,263 $ 6,542,845
Basic and diluted net loss per share
0.06 0.04 0.10 0.10
Weight average shares outstanding
62,239,737 62,234,737 62,239,737 62,234,737
2011 Outlook We anticipate our
total revenues in 2011 versus 2010 to increase by 40% or approximately $17.2 million with growth in all categories of our product sales
gross profit margin in 2011 is expected to be approximately 53% due to increased raw material costs resulting from inflation
overall 2011 net profit margin to be approximately 28%.
However, there is no assurance that these predictions will be reached.
GeoTeam ® note : Applying the company's guidance, for the last half of fiscal 2011:
Revenues will come in at $35.0 million vs. $23.5 million
Net income will come in at $9.8 million vs. $6.9 million
EPS will come in at (assuming no dilution) $0.16 vs. $0.11
Comments & Business Outlook
September 30, 2010
September 30, 2009
REVENUE
$ 11,617,393 $ 10,246,606
COST OF GOODS SOLD
5,985,295 4,486,366
Gross Profit
5,632,098 5,760,240
OPERATING EXPENSES
Selling, general & administrative expenses
1,261,392 516,325
Depreciation and amortization expenses
19,697 20,331
Research & development
737,428 -
Total operating expenses
2,018,517 536,656
Operating profit
3,613,581 5,223,584
OTHER INCOME (EXPENSES)
Interest expenses
(1,168 ) (15,899 )
Interest income
39,355 -
Other income
5
Total other income (expense)
38,187 (15,894 )
INCOME (LOSS) BEFORE INCOME TAXES
3,651,768 5,207,690
Income taxes
1,115,414 1,318,033
Net income (loss)
$ 2,536,354 $ 3,889,657
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss)
$ 224,553 $ 184,455
Comprehensive income
$ 2,760,907 $ 4,074,112
Basic and diluted net loss per share
0.04 0.06
Weight average shares outstanding
Basic 62,239,737 62,234,737
Diluted
62,239,737 62,234,737
We anticipate our total revenues in 2011 versus 2010 to increase by 40% or approximately $17.2 million with growth in all categories of our product sales. Our gross profit margin in 2011 is expected to be approximately 53% due to raw material cost inflation. We estimate our overall 2011 net profit margins to be approximately 28%. However, there is no assurance that these predictions will be reached.
Liquidity Requirements
Comments & Business Outlook
For the year ended June 30, 2010 as compared to June 30, 2009
Total revenues increased by 293% to $43.1 million for the year ended June 30, 2010 compared to the same period in 2009. The $32,138,144 increase in revenue is attributable to strong performances from our sales distribution channels.
"This growth in sales is attributable to volume and our efforts to continue to develop our distribution channels by hiring additional sales agents to assure that our products and their associated benefits are seen by those making or influencing the purchasing decisions."
Net income increased 375.0% to $ 13.3 million from $2.8 million . EPS increased to $0.21 compared to $0.05 .
GeoTeam ® Note : 2010 Fourth quarter EPS was flat at $0.05 .
2011 Outlook:
We anticipate our :
Revenues will increase 40.0% to $60.3 million with growth in all categories of our product sales. Gross profit margin to be approximately 53% due to raw material cost inflation. Net profit margins to be approximately 28% . This would translate into net income of $16.9 million and EPS of $0.27 using the 2010 share count of 62.2 million.
GeoSpecial Notes
Added to the GeoSpecial list on December 28, 2009 @ 0.55. Catalyst : Stock was selling at a cheap valuation, given bullish guidance .Peak performance : Reached a high of $2.00 on January 7, 2010. Current Price : $0.81Current road block : No IR; very illiquid; Stock has over 60 million outstanding shares which is above our preferred 50 million maximum threshold; Did not reiterate guidance in its Third quarter 10Q; Company still has not responded to our questions.
GeoTeam note :
On July 6, 2010 we removed all ChinaHybrids from the GeoBargain/Special lists, pending review.
We have yet to verify if the Chinese filings for ChinaHybrid stocks we monitor match respective SEC filings. We are in the process of completing this task. Although we are not totally convinced that SAIC filings are an accurate represenation of financial statements the issue is impacting stock prices. Conservative investors may want to limit exposure or buy put options on stocks, that have this availability, as insurance against long positions, until we publish our findings. Odds are we will identify some promising companies that will fail this litmus test.
GeoTeam® Note:
Please note: On July 6, 2010, the GeoTeam ® removed all Chinese stocks that were on GeoBargains and GeoSpecial lists to respective Radar lists as we complete our "quality assessment."If history is our guide, fear will eventually create an immense opportunity to invest in the companies that prove they can meet quality litmus tests enact shareholder friendly moves . Credibility can also be restored if independent legal/SEC opinions validate accounting practices currently in question.
***Very Important GeoTeam® note . We have yet to verify if the Chinese filings for ChinaHybrid stocks we monitor match respective SEC filings. We are in the process of completing this task. Although we are not totally convinced that SAIC filings are an accurate represenation of financial statements the issue is impacting stock prices. Conservative investors may want to limit exposure or buy put options on stocks, that have this availability, as insurance against long positions, until we publish our findings. Odds are we will identify some promising companies that will fail this litmus test.
see relevant articles
Comments & Business Outlook
We anticipate our total revenues in 2010 versus 2009 to increase by 300% or approximately $30 million with growth in all categories of our product sales . Our gross profit margin in 2010 is expected to be approximately 55.45% due to raw material cost inflation. Operating expenses will increase due to higher percentage of R&D investment as well as expanding our own distribution channels. We estimate our overall 2009 net profit margins to be approximately 22.64%. However, there is no assurance that these predictions will be reached. Fiscal Year ends in June.
Source: 10K (For the quarterly period ended December 31, 2009 )
Reverse Merger Activity
China Health was formed on July 20, 2007 for the purpose of seeking and consummating a merger or acquisition with a business entity.
On August 20, 2007, the sole shareholder of China Health entered into a Share Purchase Agreement with the owners of Humankind.
On December 31, 2008, China Health closed a reverse merger with Universal Fog, Inc, a U.S. public traded shell company.
Harbin Humankind Biology Technology Co., is in the business of the manufacture and sale of health products, “green” (or organic) food and the detection of disease susceptibility or pre-disposition through genetic studies. Harbin Huimeijia Medicine Company was incorporated on October 14, 2008. Huimeijia completed its GMP certification on July 23, 2009 and will be producing and selling our medical drugs .
Financial Summary :
Fiscal Yr. Ends June Full Year 2009 Full Year 2008 Period Change
GAAP Revenue
$10.98 million
$763.60 thousand
1337.93%
GAAP EPS
$0.05
$0.00
n/a
Tax Rate
34.36%
n/a
n/a
Fully Diluted Shares
62,234,737
61,203,088
1.69%
Source: See SEC Filing (For the period ended June 2009)
Fiscal Qtr. Ends September
1st Quarter 2010 1st Quarter 2009 Period Change
GAAP Revenue
$10.25 million
$286.21 thousand
3481.29%
GAAP EPS
$0.06
$0.00
n/a
Tax Rate
25.31%
n/a
n/a
Fully Diluted Shares
62,234,737
62,234,732
0.00%
We anticipate our total revenues in 2010 versus 2009 to increase by 101% or approximately $11.04 million with growth in all categories of our product sales. Our gross profit margin in 2010 is expected to be approximately 55.45% due to raw material cost inflation. Operating expenses will increase due to higher percentage of R&D investment as well as expanding our own distribution channels. We estimate our overall 2009 net profit margins to be approximately 22.64%.However, there is no assurance that these predictions will be reached.
Source: See SEC Filing (For the quarterly period ended September 30, 2009)
Comments & Business Outlook
2010 Outlook:
"We anticipate our total revenues in 2010 versus 2009 to increase by 101% or approximately $11.04 million with growth in all categories of our product sales. Our gross profit margin in 2010 is expected to be approximately 55.45% due to raw material cost inflation. Operating expenses will increase due to higher percentage of R&D investment as well as expanding our own distribution channels. We estimate our overall 2009 net profit margins to be approximately 22.64%.However, there is no assurance that these predictions will be reached."
Source: See SEC Filing (For the quarterly period ended September 30, 2009)
Special Situations
The GeoTeam ® is taking a bold move and coding China Health Industries (Pinksheets:CHHE), which trades on the Pink Sheets, as a GeoSpecial. After some initial due diligence and reviewing filed financials it is possible that some investors may view CHHE as an interesting risk/reward opportunity.
Positive points:
Fiscal 2009 revenues increased 1337.93% to $10.98 million.
First quarter fiscal 2010 revenues increased 3481.29% to $10.25 million.
First quarter 2010 sales have essentially matched all of 2009's figure.
Achieved 2009 EPS profitability of $0.05.
First quarter 2010 EPS has already matched all of 2009's figure.
Positive 2010 outlook:
"We anticipate our total revenues in 2010 versus 2009 to increase by 101% or approximately $11.04 million with growth in all categories of our product sales. Our gross profit margin in 2010 is expected to be approximately 55.45% due to raw material cost inflation. Operating expenses will increase due to higher percentage of R&D investment as well as expanding our own distribution channels. We estimate our overall 2009 net profit margins to be approximately 22.64%.However, there is no assurance that these predictions will be reached."
Source: See SEC Filing (For the quarterly period ended September 30, 2009)
We should note that we are somewhat perplexed on one issue : The 2010 guidance, which implies 2010 full year revenues of approx. $22 million, seems a little peculiar given that CHHE has already booked $10.25 million in revenues for its 2010 first quarter. The GeoTeam ® will delve into this matter.
Other points to ponder:
Shares outstanding of 62 million are above our preferred minimum.
We found no verbiage on 2010 capital requirements
Stock trades on the pinksheets, although the company is filing SEC documents, a practice uncommon with pinks.
