China Health Industries Holdings, Inc. (Form: 10-K, Received: 10/15/2013 17:21:49)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-K

(Mark One)

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

For the fiscal years ended June 30, 2013 and 2012

For the three month periods ended September 30, 2012 and 2011

For the six month periods ended December 31, 2012 and 2011

For the nine month periods ended March 31, 2013 and 2012

¨ 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)

Delaware

86-0827216

State of other jurisdiction of

incorporation or organization

(I.R.S. Employer Identification No.)

168 Binbei Street, Songbei District, Harbin City

Heilongjiang Province, People’s Republic of China

150028

(Address of principal executive offices)

(Zip Code)

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

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

None

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

Common Stock, $0.0001 par value

Title of Class

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

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

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨		Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company x

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

Note. – If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.

The aggregate market value of the voting and non-voting common stock of the issuer held by non-affiliates as of December 31, 2012 was approximately $8,523,126 (30,439,737 shares of common stock held by non-affiliates) based upon the closing price of the common stock on such date.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

As of September 24, 2013, there are presently 62,239,737 shares of common stock, par value $0.0001 issued and outstanding.

Table of Contents

		Page

Part I		1

Item 1	Business	17

Item 1A	Risk Factors	17

Item 1B	Unresolved Staff Comments	17

Item 2	Properties	17

Item 3	Legal Proceedings	17

Item 4	Mine Safety Disclosures	17

Part II		18

Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18

Item 6	Selected Financial Data	19

Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 7A	Quantitative and Qualitative Disclosures About Market Risk	43

Item 8	Financial Statements and Supplementary Data	43

Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	44

Item 9A	Controls and Procedures	44

Item 9B	Other Information	45

Part III

Item 10	Directors, Executive Officers and Corporate Governance	46

Item 11	Executive Compensation	50

Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	52

Item 13	Certain Relationships and Related Transactions, and Director Independence	53

Item 14	Principal Accounting Fees and Services	53

Part IV		54

Item 15	Exhibits, Financial Statement Schedules	54

EXPLANATORY NOTE

China Health Industries Holdings, Inc., a Delaware corporation (“we”, “us” or the “Company”) has not filed financial statements with the Securities and Exchange Commission (the “SEC”) since the fiscal quarter ended March 31, 2012. The Company had been in communication with the SEC and is filing a comprehensive annual report on Form 10-K with the permission of the SEC. The comprehensive 10-K includes the required late reports for the years ending June 30, 2013 and 2012. The filing includes quarterly financial information for the three month periods ended September 30, 2012 and 2011, the three month and six month periods ended December 31, 2012 and 2011, and the three month and nine month periods ended March 31, 2013 and 2012.

PART I

Item 1. Business.

Our History and Corporate Structure

We were incorporated in the state of Arizona on July 11, 1996, and are the successor of the business known as Arizona Mist, Inc., which was founded in 1989. On May 9, 2005, we entered into a Stock Purchase Agreement and Share Exchange (effecting a reverse merger) with Edmonds 6, Inc. (“Edmonds 6”) and our name was changed to Universal Fog, Inc. Edmonds 6 was incorporated on August 19, 2004, under the laws of the State of Delaware for the purposes of engaging in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. Pursuant to the Stock Purchase Agreement and Share Exchange, Universal Fog, Inc. (which has been in continuous operation since 1996) became a wholly-owned subsidiary of Edmonds 6.

Pursuant to the Securities Purchase Agreement dated as of September 10, 2007, between the Company, Thomas Bontems (“Bontems”) and Xin Sun, we experienced a change in control whereby Xin Sun acquired a total of 22,000,545 shares of common stock of the Company from Bontems and the Company issued 2,061,200 shares of common stock of the Company to Xin Sun, such that upon consummation of the agreement, Xin Sun held an aggregate of 24,061,745 shares, or 51.53% of the total issued and outstanding shares of common stock of the Company on a fully-diluted basis.

Pursuant to the Asset Purchase and Sale Agreement dated as of September 10, 2007, between the Company and Universal Fog Systems, Inc., we transferred all our liabilities to the latter on September 10, 2007, and similarly all of our assets on December 31, 2008.

On December 31, 2008, we acquired the business of Harbin Humankind Biology Technology Co. Limited through the acquisition of all the share capital of China Health Industries Holdings Limited under the Share Exchange Agreement dated as of October 15, 2007. China Health Industries Holdings Limited was incorporated on July 20, 2007 in Hong Kong (“China Health HK”)

As a result of the above, China Health HK became our wholly-owned subsidiary. Because Harbin Humankind Biology Technology Co., Limited (“Harbin Humankind”) is a wholly-owned subsidiary of China Health HK and Harbin Huimeijia Medicine Company (“Huimeijia”) is in turn a subsidiary 99% of whose shares are owned by Harbin Humankind, both Harbin Humankind and Huimeijia are our indirect owned subsidiaries.

Our corporate structure as of June 30, 2013 was as below:

Recent Development

On April 10, 2013, Harbin Humankind entered into an agreement with the shareholders of Heilongjiang Huimeijia Pharmaceutical Co.,Ltd. (“HLJ Huimeijia”) to purchase all the equity interests of HLJ Huimeijia (the “HLJ Share Transfer Agreement”) for a total purchase price of $16,293,545 (RMB100,000,000). The full purchase price was prepaid to HLJ Huimeijia as of June 30, 2013. The procedures to change the ownership record of HLJ Huimeijia with the local State Administration for Industry and Commerce are currently under way, and the transaction is expected to close in the fourth quarter of the 2013 calendar year.

Business Overview

Harbin Humankind was incorporated in the People’s Republic of China (“PRC”) on December 14, 2003, and completed its Good Manufacturing Practice (“GMP”) certification on April 24, 2007. It 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.

Huimeijia was incorporated in the PRC on October 14, 2008. Huimeijia completed its GMP certification on July 23, 2009. We expect it will manufacture and sell our medical drugs.

Our business is conducted through our PRC subsidiaries, Harbin Humankind and Huimeijia. Our products are primarily sold through sales agents. We plan to develop chain-stores to sell our products and to eventually sell our products online.

Products

We presently have, through Huimeijia, the license to manufacture nineteen medical drugs and have obtained a State Drug Approval Issue number for each of these drugs. Huimeijia completed its GMP certification on July 23, 2009, and is now authorized to commercially manufacture and sell medical drugs.

We have, through Harbin Humankind, the license to manufacture and sell fourteen health supplement products, each of which have been assigned a State Good Health Issue number (as provided below). In addition, Harbin Humankind distributes and sells 52 kinds of health food and organic “Green” food.

We are licensed to sell our products, including our medical drugs, only in the PRC.

(i) Health Supplement Products

Our “QunLe” brand Sailuozhi soft capsule, which is made from frog oil, soybean isoflavone, procyanidine (made from grape seeds) and vitamin C, is for freckle removal and supplementing the water content of the skin. The certification number issued by the State Food and Drug Administration on August 29, 2007, is 2007B0837.

On May 12, 2010, we received a patent for this product (number 200610010394.4) under the name “Run Chao” (which has since been changed to “Qunle”) with the National Bureau of Intellectual Property.

Pursuant to a Technology Transfer Agreement dated October 12, 2007, we purchased a health product known as “Kindlink” brand propolis and black ant capsule made from propolis, black ant, acanthopanax and astragalus root from Beijing Jindelikang Bio-Technology Co., Ltd (“Jindelikang”). The change of the ownership has been approved by the State Food and Drug Administration. This product is consumed to boost one’s immunity. The certification number issued by the State Food and Drug Administration on August 20, 2004, for the license to manufacture the product is GuoShiJianZi G20040906. We have no continuing obligations under the Technology Transfer Agreement.

Pursuant to a technology transfer agreement dated January 18, 2013 (the “Technology Transfer Agreement”), we purchased twelve health products from Guangzhou Aoda Biology Beauty Healthy Technology Co., Ltd, a non-affiliated party. These twelve products are the following:

Dr. Xiao Brand Honeysuckle Pearl Capsule (Guo Shi Jian Zi G20100656), which is effective in acne removal,

Dr. Xiao Brand Multivitamin Tablet (Guo Shi Jian Zi G20080176), which is a multivitamin and mineral supplement,

Dr. Xiao Brand Zhengdian Capsule (Guo Shi Jian Zi 20070261), which is effective in relieving eyestrain,

Dr. Xiao Brand Shengui Capsule (Guo Shi Jian Zi G20080297), which is effective in increasing bone density,

Dr. Xiao Brand Multivitamin Tablet (Woman) (Guo Shi Jian Zi G20070338), which is an iron and multivitamin supplement,

Dr. Xiao Brand Shikong Soft Capsule (Guo Shi Jian Zi 20080096), which is effective in improving memory,

Dr. Xiao Brand Huangjingdanggui Tablet (Guo Shi Jian Zi G20080201), which is effective in improving nutritional anemia and chloasma,

Dr. Xiao Brand Xingxing Soft Capsule (Guo Shi Jian Zi G20080080), which is effective in improving memory,

Dr. Xiao Brand Vitamin A Fish Oil Soft Capsule (Guo Shi Jian Zi G20080406), which is effective in relieving eyestrain,

Dr. Xiao Brand Colon Cleanser Granules (Guo Shi Jian Zi G20060061), which is effective in relaxing bowels and promoting the discharge of lead,

Dr. Xiao Brand Jianli Soft Capsule (Guo Shi Jian Zi G20050710), which is effective in increasing immunity and relieving physical fatigue, and

LB Brand Xinpin Capsule (Guo Shi Jian Zi G20050770), which is effective in dispelling chloasma.

(ii) Health Food and Organic “Green” Food

Our health and organic “green” food products include (i) abalone, sea cucumber and frog oil soft capsules (Serial Number 016-2007), (ii) ganodermalucidum and aweto soft capsules (Serial Number 017-2007), (iii) propolis soft capsules, (iv) deep sea fish oil (Serial Number 012-2006), (v) liquid calcium (Serial Number 013-2006), (vi) multi-vitamins (Serial Number 010-2007), (vii) soybean isoflavone (Serial Number 012-2006), (viii) royal jelly (Serial Number 011-2006), (ix) Sleeping Beauty Capsule, (x) Virility Max Capsule, (xi) Ruddy Granule, (xii) Blood Cleanser Soft Capsule, (xiii) Colon Cleanser Capsule and (xiv) Energy Elemental Power.

The major suppliers of raw materials for our products who exceeded 10% of our total purchases in the fiscal years 2013, 2012 and 2011 are the following:

	Name of Supplier	Purchases (in U.S. Dollars)		% of Purchases
FY2013
	Shukui Wang		5,186,068		80.34	%

FY2012
	Shukui Wang		18,463,030		54.78	%
	Shanxi Senfu Biotechnology Co., Ltd		9,173,542		27.22	%

FY2011
	Shukui Wang		19,784,903		60.63	%
	Shanxi Senfu Biotechnology Co., Ltd		6,963,353		21.34	%

For the past three fiscal years, Mr. Wang Shukui has been our biggest supplier of raw materials. The Company typically signs monthly purchase orders with its suppliers and a sample of such purchase order with Mr. Wang can be found in exhibit 10.7 hereto. All purchase orders with Mr. Wang and with our other suppliers are on similar terms. Delivery of goods is against payment. The cost of delivery is borne by the suppliers. Parties have an opportunity to inspect the goods on delivery and the Company may raise any objection to the goods within 30 days of delivery. In the event of any dispute of quality, the inspection results of the municipal drug administration shall be the final determining factor. Neither party may modify or terminate the contract of sale unilaterally.

(iii) Medical Drugs

Huimeijia purchased Harbin Dong Feng Medicine Company’s license to manufacture 19 medical drugs on September 16, 2008. Huimeijia is now the registered owner of the license, approved by the Heilongjiang Food and Medicine Supervising Bureau.

A description of the 19 medical drugs is as follows:

Serial No.	Product	Efficacy

1.	Stomach-Tonic Tablets	Invigorating stomach and relieving pain. Used in the treatment of pain from stomach distention, eructation with fetid odor and fecal disorders caused by gasterasthenia and dyspeptic retention.
2.	Pediatric Compound Sulfamethoxazole Tablets (0.125g)	Used in the treatment of 1. Urinary tract infection caused by sensitive strains of Escherichia coli , Klebsiella , Enterobacter , Proteus mirabilis , Bacillus proteus and Proteus morganli . 2. Acute otitis media in children over 2 years old caused by Streptococcus pneumoniae or Hemophilus influenza . 3. Acute episode of adult chronic bronchitis caused by Streptococcus pneumoniae or Hemophilus influenza . 4. Intestinal infection and Shigella infection caused by sensitive strains of Shigellaflexneri and Shigellasonnei . 5. Pneumonia caused by Pneumocystis carinii . 6. Prevention of pneumonia caused by Pneumocystis carinii. This product can be used for patients with a history of pneumonia caused by Pneumocystis carinii or adult HIV-infected patients whose CD4 lymphocyte count is dult HIV-infected patients whose CD4 lymphocyte countTurista caused by enterotoxic Escherichia coli .
3.	Pediatric Compound Sulfamethoxazole Tablets (0.25g)	Same as above.
4.	Pipemidic Acid Tablets	Used to treat urinary tract infection and bacterial infection of the intestines caused by sensitive gram negative bacilli.
5.	Metamizole Sodium Tablets	Used to relieve fever caused hyperpyrexia and also for headache, migrainous headache, courbature, arthralgia, menalgia etc. The product also has strong anti-rheumatism effects and can be used for acute rheumatic arthritis, but because the product may induce severe adverse reaction, it is seldom applied in the treatment of rheumatic diseases.

6.	Paracetamol Tablets	Used for fever caused by common cold or epidemic influenza and also for relieving light and moderate pain such as headache, arthralgia, migraines, tooth ache, courbature, neuralgia and menalgia.
7.	Pediatric Paracetamol, Artificial Cow-bezoar and Chlorphenamine Maleate Tablets	Used to relieve fever, headache, aching pain in extremities, sneezing, rhinorrhea, nasal obstruction, pharyngodynia and other symptoms in children caused by common cold or epidemic influenza.
8.	Compound Theophylling Hydrochloride Tablets	Used to treat bronchial asthma.
9.	Powerful Loquat Syrup	Used for the treatment of coughing and reduction of sputum caused by bronchitis.
10.	Purple Orange Cough Syrup	Relieving cough and eliminating sputum. Used to relieve coughing and excessive phlegm as well as expectoration.
11.	Cough Syrup of Loquat Leaf	Used to clear lungs, relieve coughs and eliminate sputum and excessive phlegm.
12.	Children’s Cough Syrup	Eliminating phlegm and relieving cough. Used to relieve coughs caused by the common cold in children.
13.	Pentoxyverine Citrate and Ammonium Chloride Syrup	Used for cough and expectoration.
14.	Schisandra Syrup	Tonifying vital energy and invigorating the kidneys. Used in the treatment for neurastheria, dizziness and insomnia.
15.	Ginseng Oral Liquid	Used to nourish renal “qi” and promote fluid production to quench thirst. Used to treat fatigue and acratia caused by deficiency of vital energy as well as poor appetite, cardiopalmus and shortness of breath, insomnia and forgetfulness.

16.	Compound Fluououracil Oral Solution	Used in the therapeutic treatment of digestive tract cancer (colon carcinoma and gastric carcinoma), mammary adenocarcinoma, primary hepatic carcinoma.
17.	Gossypol, Potassium Chloride and Vitamins B Capsules	Used in the treatment of uterine bleeding brought on by menopause.
18.	Compound Belladonna and Aluminum Hydroxide Powder	Used for relieving stomach pain, brash (heartburn) and acid reflux caused by gastric hypersecretion.
19.	Gentian and Sodium Bicarbonate Powder	Used for anorexia, gastric hypersecretion and dyspepsia.

Distribution

We signed a non-exclusive cooperation agreement with the Commercial Bureau of Qing’an County, Heilongjiang on September 17, 2008. Under the agreement, various affiliated companies of the Commercial Bureau provides organic food and green food products to us for distribution and sale throughout the PRC.

We order products from the Commercial Bureau and such products are delivered within 20 days of placing the order. The prices for these products fluctuate within a 3% range from its wholesale price, but we are not restricted in any way in dictating the retail prices for such products. We typically have an average profit margin of approximately 20%.

Most of our products are sold to sales agent. In fiscal year of 2012, our products were mainly sold in Jiangsu, Zhejiang , Gansu, Anhui, Shanghai and Beijing provinces or cities. In fiscal year of 2013, our products were mainly sold in Zhejiang, Beijing, Jiangsu, Shanghai, Gansu and Anhui provinces or cities.

Gene Studies

Genes are the basic elements of life. The makeup of certain genes may predispose someone to certain types of diseases. Accordingly, the purpose of the gene study services we provide to our customers is to educate them on their pre-dispositions or susceptibility to certain types of diseases.

We entered into a cooperation contract with Shanghai Hujing Bio Technology Co., Ltd (“Hujing”) on February 28, 2008. Pursuant to this agreement, we collect genetic samples from our customers using simple oral smear techniques and send the samples to Hujing for analysis. Hujing will then deliver a report to us for each sample which we will transmit to our customers.

E-business

We are in the process of building the infrastructure to conduct our business over the internet. A B2C e-business call and sales center has been established and will become an integral part of our distribution channel in the future. We have employed graduates from Tsinghua University, Harbin Industry University and Harbin Engineering University to develop the ERP, CRM and OA software for our e-business. OA software has been used in our daily operation. The Company plans to sell its products via internet in 2014.

Our Customers

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

Our customers who contributed more than 10% of our consolidated revenues during the past two fiscal years are as following. There were no customers contributing more than 10% of our consolidated revenues during the fiscal year 2011.

Name	Products Sold	Sales (in U.S. Dollars)		Percent of Sales
FY2013
Yufeng Shen	Waterlilies Soft Capsule, Propolis and Black Ant Capsule, New looks-28 Set, Virility Max Capsule, Colon Cleanser Capsule		988,458		12.79	%
Hao Liu	Waterlilies Soft Capsule, Propolis and Black Ant Capsule, New looks-29 Set, Virility Max Capsule, Colon Cleanser Capsule		952,865		12.33	%
Xiaomei Xu	Waterlilies Soft Capsule, Propolis and Black Ant Capsule, New looks-30 Set, Virility Max Capsule, Colon Cleanser Capsule		943,283		12.21	%
Dawei Shen	Waterlilies Soft Capsule, Propolis and Black Ant Capsule, New looks-31 Set, Virility Max Capsule, Colon Cleanser Capsule		933,695		12.08	%
Mingke Bai	Waterlilies Soft Capsule, Propolis and Black Ant Capsule, New looks-32 Set, Virility Max Capsule, Colon Cleanser Capsule		822,803		10.65	%
Libin Wang	Waterlilies Soft Capsule, Propolis and Black Ant Capsule, New looks-33 Set, Virility Max Capsule, Colon Cleanser Capsule		813,215		10.52	%
FY2012
Haiping Li	Energy Elemental Powder, Virility Max Capsule, Sleeping Beauty Capsule, Blood Cleanser Soft Capsule, Waterlilies Soft Capsule, Colon Cleanser Capsule, Ruddy Granule		7,279,076		12.35	%
Yufeng Shen	Energy Elemental Powder, Virility Max Capsule, Sleeping Beauty Capsule, Blood Cleanser Soft Capsule, Waterlilies Soft Capsule, Colon Cleanser Capsule, Ruddy Granule		7,159,114		12.15	%
Xinting Mou	Energy Elemental Powder, Virility Max Capsule, Sleeping Beauty Capsule, Blood Cleanser Soft Capsule, Waterlilies Soft Capsule, Colon Cleanser Capsule, Ruddy Granule		6,490,965		11.01	%

Manufacture

We manufacture our products on a plot of land located in Jin Xing Industrial Park, Songbei District, Harbin. On June 7, 2004, the Company entered into a Land Use Purchase Contract with the local government, pursuant to which the Company agreed to purchase the right to use a piece of land, approximately 8 acres (32,000 square meters), located in Harbin County, Heilongjiang Province for commercial purposes for a fifty-year period from June 7, 2004 through June 6, 2054, for $637,261 (RMB5,248,000). The Company has fully paid to the government the consideration for the land use right on June 13, 2004. The Department of Housing and Urban Development of Harbin City approved this transaction. The Company is in the process of applying for the title certificate from the local government. The manufacturing facility on the land is 4,000 square meters and there are five production lines which is sufficient for our purposes. We package our products in bottles, plastic containers and aluminum foil bags there.

Our Development Strategy

We will focus on combining our products with traditional Chinese medicine, the creation of new products, and developing our B2C e-business and chain-stores. We plan to implement health management projects in our future chain-stores throughout China and establish a database of our clients’ health from data obtained from our B2C e-business and call center.

Our business model is to establish a one-stop shop for our customer’s health needs. From conducting a genetic profile of our customer to determine his/her susceptibility to certain types of diseases and then customizing health supplements and organic/green food to meet his/her needs, we plan to cater to our customer’s needs at all levels. With the distribution network we hope to establish through our chain stores and B2C e-businesses, we plan to eventually branch into the sale and distribution of beauty products and medical appliances.

The Future

Within the next ten years, our goals are to:

Increase product coverage in target markets; achieve 20%-30% coverage

Our target market is the health industry market. Presently, we believe that our product coverage is approximately 0.2%. We plan to open distribution stores in different provinces of China to expand our coverage. We also plan to sell our products through B2C websites to our customers.

Enter into the medicine, health product, health industry top 500 companies in the PRC

Currently, we are not ranked in the top 500 medicine, health product and health industry companies in the PRC. We believe that if our projected increase in revenue is achieved, we will achieve our goal of becoming one of the top 500 medicine, health product, health industry companies in China.

Form a diversified management group

Currently, our management group comprises people graduated from the most prestigious universities in the PRC, such as Tsinghua University and Remin University of China. We plan to further diversify management group by hiring talent both in the PRC and abroad.

Create an internationally famous brand

Currently, our products are sold under the brand names Qunle, Kindlink and Dr. Xiao in the PRC. Our goal is eventually to expand our sales abroad to countries such as the United States of America, Russia, and Eastern Europe and South-east Asian countries.

Enter into the international market

Currently, we sell our products only in the PRC. We plan to sell our products to Russia, East Europe, and Southeast Asia in the future.

Our Business Plan

The plans designed to meet our manufacturing, marketing and profit targets include:

Manufacturing:

(a)

improving the manufacturing techniques and staff training;

(b)

guaranteeing high quality material supply;

(c)

strengthening the working procedure controls;

(d)

implementing GMP to ensure a compliance standard in the food and medical industries;

(e)

ensuring that all employees have adequate training in health regulations

Marketing: Adopt an effective marketing mode to:

(a)

utilize direct distribution of products to chain stores nationwide;

(b)

build business alliances with well-known enterprises to create private label brands;

(c)

expand the marketing of our products beyond the traditional methods;

Product Distribution:

(a)

enlarge our sales and marketing force while developing new markets;

(b)

strengthen the distribution channel by developing promotion strategies and participating in trade shows;

(c)

develop 3-5 new products to market each year, we already purchased 12 health supplements in January 2013;

(d)

develop new markets through innovation and research

Our approach to manufacturing, marketing, cost control and products distribution, which is detailed above, is designed to minimize production costs and increase revenue at the same time. We feel that our procedures will enable us to reach our sales goals with an optimal manufacturing cost. The result should yield profits and a return to our investors.

Good Manufacturing Practice or “GMP” is a term that is recognized worldwide for the control and management of manufacturing and quality control testing of foods and pharmaceutical products. An important part of GMP is documentation of every aspect of the process, activities, and operations involved with drug and medical device manufacture. Additionally, GMP requires that all manufacturing and testing equipment has been qualified as suitable for use, and that all operational methodologies and procedures (such as manufacturing, cleaning, and analytical testing) utilized in the drug manufacturing process have been validated (according to predetermined specifications), to demonstrate that they can perform their purported function(s).

The Market for Healthcare and Beauty Products

The health product industry is one of the mainstream industries in the PRC, since it has a high level of recognition and importance. Recently there have been new policies for health products, which control quality, manufacturing, manufacturing environments and techniques. With the PRC’s large and aging population there will be a steady demand for healthcare products. It is predicted that the healthcare and beauty industry will flourish over the next 50 years.

The Healthcare Product Market in the PRC

At present, the PRC healthcare market is growing rapidly and the demand for Chinese medicine and healthcare products has doubled every year. According to certain estimates, the PRC is the world’s fifth largest healthcare product market and by the year 2020, the size of the PRC healthcare product market may exceed the United States and become the number one largest healthcare market.

Production: According to certain estimates, approximately 7,000 healthcare manufacturers and companies have passed the PRC GMP standards. This includes over 500 Sino-Foreign Joint Ventures.

The Healthcare Product Market in Heilongjiang Province, PRC

The healthcare product industry is the major industry in Heilongjiang Province. Harbin Pharmaceutical Group Health Technology has been the market leader in the PRC for many years. According to a study conducted by Harbin Pharmaceutical Group in 2008, over the last 10 years products of the Harbin Pharmaceutical Group Sixth Pharm Factory, and Flaming Sun Group have been among the most popular healthcare foods and products in the PRC.

Competition in the Healthcare Products Industry

We believe our competitors are:

Harbin DaZhong Pharmaceutical Co., Ltd.(Located in Harbin, Heilongjiang Province)

Harbin ShenXinJianKang Co., Ltd. (Located in Harbin, Heilongjiang Province)

Tsinghua Unisplendour Corporation Limited (Located in Weihai City, Shandong Province)

Yeecare Company (Located in Beijing)

Heilongjiang Tianlong Pharmaceuticals Co., Ltd (Located in Helongjiang Province)

Our Competitive Advantages and Strategy

We believe that we have the following competitive advantages over our competitors:

We have more categories of products and a diversified production line.

We have a strong and effective research and development team.

We are a self-owned enterprise, and have the support of the local government.

We have a geographical advantage being located in Heilongjiang Province, the center of the healthcare industry in the PRC.

We enjoy some financial support from the local government.

Sales and Marketing

We plan to open more chain stores throughout the PRC. Customers who are members of our stores will enjoy discount off our products and services. Complementing these stores, we plan to develop a 24-hour delivery system for our B2C e-business.

We incurred approximately $1,000,000 for advertising and promotion for the fiscal year of 2012 and $500,000 for the fiscal year of 2013.

Intellectual Property

We have received a patent (200610010394.4) for our “Qunle” brand Sailuozhi soft capsule from the National Bureau of Intellectual Property. We had initially applied for and used the trade name of “RunChao” soft capsules but the trade name was changed to “Qunle”, and the change has been approved by the National Bureau of Intellectual Property.

Pursuant to a Technology Transfer Agreement dated October 12, 2007 (“Kindlink Technology Transfer Agreement”), we purchased for a total of RMB350,000 the technology, manufacturing, and trademark rights to the health product known as “Kindlink” brand propolis and black ant capsule made from propolis, black ant, acanthopanax, astragalus root from Jindelikang. The change of the ownership has been approved by the State Food and Drug Administration. This product is consumed to boost one’s immunity. The certification number issued by the State Food and Drug Administration on August 20, 2004, to permit the manufacture of the product is GuoShiJianZi G20040906. We have no continuing obligations under the Kindlink Technology Transfer Agreement.

We have the following seven trademarks:

Trademark	Certificate No.		Category	Registrant	Valid Term
“Qunle” with an arch image		3895929	No.5 : Dietetic foods adapted for medical purposes; Food preparations adapted for medical purposes; Albuminous milk; Dietetic beverages adapted for medical purposes; Milk sugar; Diabetic bread; Albuminous foodstuffs for medical purposes; Food for babies; Dietetic substances adapted for medical use; Nutritional additives for medical purposes	Harbin Humankind	7/7/2006 to 7/6/2016
“Qunle”		3896026	No.5 : Food preparations adapted for medical purposes; Albuminous milk; Dietetic beverages adapted for medical purposes; Milk sugar; Diabetic bread; Albuminous foodstuffs for medical purposes; Food for babies; Dietetic substances adapted for medical use; Nutritional additives for medical purposes	Harbin Humankind	7/7/2006 to 7/6/2016
“Wangzu”		4857905	No.30: Molasses for food; Honey; pollen healthy grease; tortoise tuchahoe paste; breed columbine extract; helix alga; non-medicial nutrition liquid; non-medicial nutrition powder; non-medicial nutrition capsule; sugar candy bird’s nest	Harbin Humankind	5/14/2008 to 5/13/2018
“Kindlink”		3236981	No.5: Food preparations adapted for medical purposes; Dietetic substances adapted for medical use	Harbin Humankind	12/7/2003 to 12/06/2013
“Huimeijia”		5280303	No.5 : Medicine for human consumption; Medical nutrition capsule; Fibres (Edible plant) [non-nutritive]; Injection; Raw material drug; Troche; suppository; Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted for medical use	Harbin Humankind	7/21/2009 to 7/20/2019
“Huide”		5280304	No.5 : Medicines for human consumption; Medical nutrition capsule; Fibres (Edible plant) [non-nutritive]; Injection; Raw material drug; Troche; suppository; Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted for medical use	Harbin Humankind	7/21/2009 to 7/20/2019
“KDLK”		3230404	No.5 : Food preparations adapted for medical purposes; Dietetic foods adapted for medical purposes; Dietetic substances adapted for medical use	Harbin Humankind	9/28/2003 to 9/27/2023

In addition, the trademark of “dr. xiao” and its associated image under the registration number 5176731 is in the process of the name transfer from Guangzhou Aoda Biology Beauty Healthy Technology Co., Ltd from whom we acquired 12 health products in January 2013.

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

Name of Invention Patent		Inventor		Patent No.		Authorization Announcement Date		Owner
Runchao Soft Capsule and Its Manufacturing Method		Xin Sun		ZL200610010394.4		May 12, 2010		Xin Sun

Regulation

The laws governing our business are as follows:

Pharmaceutical administration law of the PRC enacted January 12, 2001

Healthcare registration and administration law, enacted January 7, 2005

Measures for the Administration of Pharmaceutical Trade License, enacted January 4, 2004

Measures for the Supervision Over and Administration of Pharmaceutical Production, enacted May 8, 2004

Food Safety Law of the PRC, enacted June 1, 2009

Regulation on the Implementation of the Food Safety Law of the PRC, enacted July 20, 2009

Regional regulation: Heilongjiang Regional Medicinal Materials Resource Protection Bylaw, enacted January 8, 2005

In the PRC, a Good Manufacturing Practice Certification (“GMP Certification”) is required for companies that produce medical drugs and health supplements. It is also required to market our medical drugs and health supplements. According to the Administrative Rules of Drug Manufacturing and Certification issued by the State Food and Drug Administration of the PRC on September 7, 2005, the State Food and Drug Administration is responsible for the review and issuance of GMP Certification. To obtain a GMP Certification, a company shall submit its application; the State Food and Drug Administration will then conduct a technical review of the application materials; if such company passes the technical review, the State Food and Drug Administration will inspect the manufacturing site. The State Food and Drug Administration also conducts follow-up inspections on the manufacturing site. After the issuance of the GMP Certification, the State Food and Drug Administration may inspect the manufacturing site from time to time. The GMP Certifications of our wholly owned subsidiaries, Harbin Humankind and Huimeijia, are valid through February 14, 2015 and July 22, 2014, respectively. Once GMP Certification is obtained, we would be able to manufacture and market our products without further governmental approval.

Employees

We have 76 employees including 6 officers, 17 administrators, 31salespersons and 22 workers in manufacturing. We believe that we are in compliance with local prevailing wage, contractor licensing and insurance regulations, and have good relations with our employees.

We also have 19 independent workers for packing.

Item 1A. Risk Factors.

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

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

All land belongs to the State in PRC. Enterprises and individuals can pay the State a fee to obtain a right to use a piece of land for commercial purpose or residential purpose for an initial period of 50 years or 70 years, respectively. The land use right can be sold, purchased, and exchanged in the market. The successor owner of the land use right will reduce the amount of time which has been consumed by the predecessor owner.

Item 3. Legal Proceedings.

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

Item 4. Mine Safety Disclosures.

This item is not applicable to us.

PART II

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

Market Information

Our common stock is traded over-the-counter on the OTC Markets Pink Tier under the designation CHHE.PK (previously UFOG.OB) and the market for the stock has been relatively inactive. The range of high and low bid quotations for the quarters of the last three years ended June 30, 2013, 2012 and 2011 and the subsequent interim period for which financial statements are included is listed below. The quotations are taken from Yahoo Finance. They reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

Calendar Quarter	High Bid		Low Bid
Fiscal Year ended June 30, 2011
First Quarter	$	0.99	$	0.70
Second Quarter	$	0.92	$	0.50
Third Quarter	$	0.93	$	0.51
Fourth Quarter	$	1.78	$	0.30
Fiscal Year ended June 30, 2012
First Quarter	$	0.50	$	0.30
Second Quarter	$	1.00	$	0.44
Third Quarter	$	1.25	$	0.42
Fourth Quarter	$	1.00	$	0.50
Fiscal Year ended June 30, 2013
First Quarter	$	0.50	$	0.30
Second Quarter	$	0.65	$	0.05
Third Quarter	$	0.19	$	0.01
Fourth Quarter	$	0.09	$	0.07

As of September 24, 2013, we had approximately 495 shareholders of record of our common stock, including the shares held in street name by brokerage firms. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

Dividends

We have not paid dividends on our common stock and do not anticipate paying such dividends in the foreseeable future. We will rely on dividends from Humankind for our funds and PRC regulations may limit the amount of funds distributed to us from Humankind, which will affect our ability to declare any dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

As of the date of this annual report, we do not have any securities authorized for issuance under any equity compensation plans and we do not have any equity compensation plans.

Registrar and Stock Transfer Agent

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

Shares Eligible for Future Sale

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

Penny Stock Regulations

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

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

Recent Sale of Unregistered Securities

None.

Repurchase of Equity Securities

None.

Item 6. Selected Financial Data.

Not Applicable.

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

FORWARD LOOKING STATEMENTS

We make certain forward-looking statements in this Annual Report on Form 10-K (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 the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” as well as 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. 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. 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.

The nature of our business makes predicting the future trends of our revenue, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. 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, economic, and market conditions and geopolitical events;

legislative and regulatory changes that affect our business;

the availability of funds and working capital;

the actions and initiatives of current and potential competitors;

investor sentiment; and

our reputation.

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

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

Except as otherwise indicated by the context, references in this Report to “we,” “us,” “our,” “the Registrant,” “our Company,” or “the Company” are to China Health Industries Holdings, Inc., a Delaware corporation, China Health Industries Holdings Limited, a corporation incorporated under the laws of Hong Kong, its wholly owned subsidiary in China, Harbin Humankind Biology Technology Co. Limited and indirect 99% owned subsidiary, Harbin Huimeijia Medicine Company. Unless the context otherwise requires, all references to (i) “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 subsidiary, Humankind.

Humankind was incorporated in the People’s Republic of China (“PRC”) on December 14, 2003 and completed its Good Manufacturing Practice (“GMP”) certification on April 24, 2007. It is engaged in the manufacture and sale of health products, “green” (or organic) food and the detection of disease susceptibility or pre-disposition through genetic studies.

Huimeijia, was incorporated in the PRC on October 14, 2008 and completed its GMP certification on July 23, 2009. It is anticipated that Huimeijia will be producing and selling our drugs. As of the date of this Report, Huimeijia has not started any production or sales.

We sell our products to our own sales personnel and our sales agents, who in turn sell our products to our end customers. We have sales agents located in Jiangsu, Zhejiang, Gansu, Shanghai, Anhui and Beijing, where most of our revenues were generated from. Our sales through agents in Zhejiang, Beijing, Jiangsu, Shanghai, Gansu and Anhui provinces accounted for 13%, 12%, 12%, 12%, 11% and 11% of our total sales, respectively, for the fiscal year ended June 30, 2013. Our sales through agents in Jiangsu, Zhejiang and Gansu provinces accounted for 12%, 12% and 11% of our total sales, respectively, for the year ended June 30, 2012. Although we do not currently sell our products online, we expect to do so in the future.

Through Humankind, we are licensed to manufacture and sell two health supplement products, which have a State Good Health Issue Number as provided below. Humankind distributes and sells seven kinds of health food and one kind of cosmetics product. In addition, the Company purchased 12 health supplement products on January 18, 2013 from a third-party company based in Guangdong province.

Currently, we are only licensed to sell our products in the PRC.

(i)	Health Supplements

Our “QunLe” brand Sailuozhi soft capsule, which is made from frog oil, soybean isoflavone, procyanidine (made from grape seeds) and vitamin C, is an effective product for freckle removal and supplementing the water content of the skin. The certification number issued by the State Food and Drug Administration on August 29, 2007 was GuoShiJianZi20070356.

On May 12, 2010, we obtained a patent for this product (2006100103944) under the name “Run Chao” (which has now been changed to “Qunle”) from the National Bureau of Intellectual Property.

Pursuant to a technology transfer agreement dated October 12, 2007 (the “Jindelikang Technology Transfer Agreement”), we purchased a health product known as the “Kindlink” brand propolis and black ant capsule, which is made from propolis, black ant, acanthopanax and astragalus root, from Beijing Jindelikang Bio-Technology Co., Ltd. The change of the ownership was approved by the China Food and Drug Administration (the “CFDA”). This product is consumed to boost one’s immunity. The certification number issued by the CFDA on August 20, 2004 for the license to manufacture the product was GuoShiJianZi G20040906. We have no continuing obligations under the Jindelikang Technology Transfer Agreement.