---

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

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2014

[   ] 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 or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

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

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

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

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [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 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   [   ]	Smaller reporting company [X]
( Do not check if a smaller reporting company )

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of February 10, 2015, there are 62,239,737 shares of common stock, $0.0001 par value, issued and outstanding.

---

TABLE OF CONTENTS

PART I		FINANCIAL INFORMATION		Page
Item 1.		Financial Statements (Unaudited)		1
		Condensed Consolidated Balance Sheets As of December 31, 2014 and June 30, 2014 (Unaudited)		1
		Condensed Consolidated and Combined Statements of Operations and Comprehensive Income For the Three Months and Six Months Ended December 31, 2014 and 2013 (Unaudited)		2
		Condensed Consolidated and Combined Statements of Cash Flows For the Six Months Ended December 31, 2014 and 2013 (Unaudited)		3
		Notes to Condensed Consolidated and Combined Financial Statements As of December 31, 2014 (Unaudited)		4
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.		Controls and Procedures		25
PART II		OTHER INFORMATION		26
Item 6.		Exhibits		26
Signatures				27
Exhibits/Certifications				28

---

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

		December 31,			June 30,
		2014			2014
ASSETS
Current assets
Cash and cash equivalents	$	28,320,894		$	27,232,074
Notes receivable		-			28,095
Accounts receivable, net		1,989,926			2,230,746
Inventory		908,152			1,037,939
Other receivables, net		46,112			83,570
Advance to suppliers		69,730			40,504
Prepaid expenses		-			101,965
Total current assets		31,334,814			30,754,893
Property, plant and equipment, net		4,496,423			4,661,072
Intangible assets, net		5,173,951			5,452,161
Construction in progress		534,500			1,934
Total assets	$	41,539,688		$	40,870,060
LIABILITIES AND EQUITY
Current liabilities
Short-term loans	$	1,611,707		$	1,611,967
Accounts payable and accrued expenses		626,790			627,109
Other payables		60,729			83,798
Advance from customers		717,835			245,308
Related party debts		1,674,078			1,776,851
Wages payable		191,036			69,544
Taxes payable		284,186			403,970
Total current liabilities		5,166,361			4,818,547
Equity
Common stock, ($0.0001 par value, 300,000,000 shares authorized,       62,239,737 issued and outstanding as of December 31, 2014 and       June 30, 2014, respectively)	$	6,224		$	6,224
Additional paid-in capital		27,317			27,317
Accumulated other comprehensive income		3,234,517			3,242,959
Statutory reserve		38,679			38,679
Retained earnings		33,066,336			32,736,081
Total stockholders' equity		36,373,073			36,051,260
Non-controlling interests		254			253
Total equity		36,373,327			36,051,513
Total liabilities and equity	$	41,539,688		$	40,870,060

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

1

---

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

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

2

---

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		For the Six Months Ended
		December 31,			December 31,
		2014			2013
Cash Flows from Operating Activities
Net income (loss) available to China Health Industries Holdings	$	330,255		$	(1,005,932	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expenses		448,487			600,040
(Recovery of) provision for doubtful accounts		(615	)		9,910
Noncontrolling interests		-			(71	)
Changes in operating assets and liabilities
Accounts receivable		242,986			(885,867	)
Other receivables		37,742			41,088
Inventory		130,649			66,402
Advance to Suppliers and prepaid expenses		73,294			263,397
Accounts payables and accrued expenses		(219	)		(48,464	)
Advance from customers and other payables		453,085			(58,396	)
Wages payable		122,466			(131,071	)
Taxes payable		(120,671	)		45,834
Net cash provided by (used in) operating activities		1,717,459			(1,103,130	)
Cash Flows from Investing Activities
Decrease in notes receivable		28,313			22,600
Purchases of property, plant and equipment		(3,755	)		(102,560	)
Purchases of intangible assets		-			(11,460	)
Increase in construction in progress		(536,795	)		-
Net cash used in investing activities		(512,237	)		(91,420	)
Cash Flows from Financing Activities
Collection of related party debts		(519,841	)		29,339
Proceeds from related party loan		416,508			491,162
Net cash (used in) provided by financing activities		(103,333	)		520,501
Effect of exchange rate changes on cash and cash equivalents		(13,069	)		393,068
Net increase/(decrease) in cash and cash equivalents		1,088,820			(280,981	)
Cash and cash equivalents, beginning balance		27,232,074			28,868,533
Cash and cash equivalents, ending balance	$	28,320,894		$	28,587,552
Supplemental cash flow information
Cash paid for income taxes	$	190,536		$	-
Cash paid for interest expense	$	62,198		$	13,863
Non-cash investing activities:
Transfer to property, plant and equipment from construction in progress	$	-		$	2,164,828
Non-cash financing activities:
Loan from related party for the construction of a facility	$	495,474		$	-
Collection of related party debts for selling drug approval numbers	$	(519,841	)	$	-

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

3

---

CHINA HEALTH INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
As of December 31, 2014 (Unaudited)

Note 1 - ORGANIZATION AND BUSINESS BACKGROUND

China Health Industries Holdings, Inc. (“China Health US”) was incorporated in the State of Arizona on July 11, 1996 and was the successor of the business known as Arizona Mist, Inc. which began in 1989. On May 9, 2005, it entered into a Stock Purchase Agreement and Share Exchange (effecting a reverse merger) with Edmonds 6, Inc. (“Edmonds 6”), a Delaware corporation, and changed its name to Universal Fog, Inc. Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous operation since 1996) became a wholly-owned subsidiary of Edmonds 6.

China Health Industries Holdings Limited (“China Health HK”) was incorporated on July 20, 2007 in Hong Kong under the Companies Ordinance as a limited liability company. China Health HK was formed for the purpose of seeking and consummating a merger or acquisition with a business entity organized as a private corporation, partnership, or sole proprietorship as defined by FASB ACS Topic 915 (“Development Stage Entities”).

Harbin Humankind Biology Technology Co., Limited (“Humankind”) was incorporated in Harbin City, Heilongjiang Province, the PRC on December 14, 2003, as a limited liability company under the Company Law of the PRC. Humankind is engaged in the manufacturing and sale of health products.

On August 20, 2007, the sole shareholder of China Health HK entered into a share purchase agreement (the “Share Purchase Agreement”) with the owners of Humankind. Pursuant to the Share Purchase Agreement, China Health HK purchased 100% of the ownership in Humankind for a cash consideration of $60,408 (the “Share Purchase”). Subsequent to the completion of the Share Purchase, Humankind became a wholly-owned subsidiary of China Health HK. The Share Purchase was accounted for as a “reverse merger” since the owner of Humankind owned a majority of the outstanding shares of China Health HK’s common stock immediately following the execution of the Share Purchase Agreement, it was deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that have been reflected in the financial statements for periods prior to the Share Purchase are those of Humankind and have been recorded at the historical cost basis. After completion of the Share Purchase, China Health HK’s consolidated financial statements include the assets and liabilities of both China Health HK and Humankind, the historical operations of Humankind, and the operations of China Health HK and its subsidiaries from the closing date of the Share Purchase.

On October 14, 2008, Humankind set up a 99% owned subsidiary, Harbin Huimeijia Medicine Company (“Huimeijia”), with its primary business being manufacturing and distributing medicine. Mr. Xin Sun, the Company’s majority owner, owns 1% of Huimeijia. Huimeijia is consolidated in the consolidated financial statements of China Health HK.

On December 31, 2008, China Health HK entered into a reverse merger with Universal Fog, Inc., a U.S. publicly traded shell company (the “Transaction”). China Health HK is the acquirer in the Transaction, and the Transaction has been treated as a recapitalization of China Health US. After the Transaction and a 20:1 reverse stock split, Mr. Xin Sun owned 61,203,088 shares of common stock, representing 98.3% of the 62,234,737 total outstanding shares of common stock of China Health US. On April 7, 2009, Mr. Sun transferred 28,200,000 shares of common stock to 296 individuals, leaving him with 33,003,088 shares of common stock of China Health US, or approximately 53.03% of the total outstanding shares of common stock. Universal Fog, Inc. changed its name to China Health Industries Holdings, Inc. on February 19, 2009.

On November 22, 2013, Humankind completed the acquisition of Heilongjiang Huimeijia Pharmaceutical Co., Ltd. (“HLJ Huimeijia”) for a total purchase price of $16,339,869 (RMB100,000,000) (the “Purchase Price”). HLJ Huimeijia was founded on October 30, 2003, and is engaged in the manufacturing and distribution of tincture, ointments, rubber paste (including hormones), topical solution, suppositories, liniment (including traditional Chinese medicine extractions), enemas and oral liquids. HLJ Huimeijia’s predecessor is Heilongjiang Xue Du Pharmaceutical Co., Ltd., which has established its brand name in the market through its supply of high quality medical products. HLJ Huimeijia is categorized as a “high and new technology” enterprise by the Science Technology Department in Heilongjiang Province. HLJ Huimeijia has 21 products which have been approved by, and have received approval numbers issued by, the China State Food and Drug Administration (the “CFDA”). In addition, HLJ Huimeijia is the holder of one patent for utility models, five patents for external design and two trademarks in China, including the Chinese brand name of “Xue Du” which has an established reputation among customers in northeastern China.

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

As of December 31, 2014, the Company’s corporate structure is as follows:

4

---

 

5

---

Note 2 - SIGNIFICANT ACCOUNTING POLICIES

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

Basis of Presentation

The accompanying unaudited consolidated and combined financial statements have been prepared by Company without audit pursuant to the rules and regulations of the SEC. Certain information and disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated and combined financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the years ended June 30, 2014 and 2013.These consolidated and combined financial statements include all adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. The results of operations for the six months ended December 31, 2014 may not be indicative of results that may be expected for the year ended June 30, 2015.

Principles of Consolidation

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

Segment Reporting

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

Fair Value of Financial Instruments

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

Fair Value Measurements

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

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

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

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

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

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

6

---

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

Statement of Cash Flows

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

Use of Estimates and Assumptions

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

Cash and Cash Equivalents

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

As of December 31, 2014 and June 30, 2014, the Company’s uninsured bank balance was mainly maintained at financial institutions located in the PRC and HK, totaled $28,320,894 and $27,232,074 respectively. The Company has no insured bank balance as of December 31, 2014 and June 30, 2014, respectively.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on management’s assessment of known requirements, aging of receivables, payment and bad debt history, the customer’s current credit worthiness, changes in customer payment patterns and the economic environment. From November 1, 2013, the Company changed its credit policy by offering ninety (90) day payment terms for sales, whereas the payment terms for sales before November 1, 2013 were thirty (30) day. As a result, as of December 31, 2014 and June 30, 2014, the net balances of accounts receivable were $1,989,926 and $2,230,746, respectively. The Company determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company evaluated the nature of all accounts receivable then provided allowance for doubtful accounts. As of December 31 and June 30, 2014, the balances of allowance for doubtful accounts were $44,845 and $45,463, respectively.

Advance to Suppliers

The Company periodically makes advances to certain vendors for purchases of raw materials, and records these purchases as advance to suppliers. As of December 31, 2014 and June 30, 2014, advance to suppliers amounted to $69,730 and $40,504, respectively.

7

---

Prepaid Expenses

Prepaid expenses principally include prepaid R&D expenses, prepaid income taxes and amount paid to secure the use of assets or the receipt of services at a future date or continuously over one or more future periods. As of December 31, 2014 and June 30, 2014, prepaid expenses amounted to $0 and $101,965, respectively.

Inventory

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

Inventory is stated at lower of cost or market and consists of materials, labor and overhead. HLJ Huimeijia uses the weighted average method for inventory valuation. The other entities of the Company use the first-in, first-out (“FIFO”) method for inventory valuation. Overhead costs included in finished goods include direct labor cost and other costs directly applicable to the manufacturing process. The Company evaluates inventory for excess, slow moving, and obsolete inventory as well as inventory the volume of which is in excess of its net realizable value. This evaluation includes analysis of sales levels by product and projections of future demand. If future demand or market conditions are less favorable than the Company’s projections, a write-down of inventory may be required, and would be reflected in cost of goods sold in the period the revision is made. There was no inventory impairment provided for the six months ended December 31, 2014 and 2013 respectively.

Impairment of Long-Lived Assets

The Company’s long-lived assets and other assets are reviewed for impairment in accordance with the guidance of the FASB ASC Topic 360-10 “Property, Plant, and Equipment” and FASB ASC Topic 205 “Presentation of Financial Statements.” The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of the asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on the Company’s reporting results and financial position. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. As of December 31, 2014 and June 30, 2014, the Company has not experienced impairment losses on its long-lived assets. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future.

Property, Plant and Equipment

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

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

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

Intangible Assets

The Company evaluates intangible assets in accordance with FASB ASC Topic 350, “Intangibles — Goodwill and Other.” Intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required. The value of the Company’s intangible assets could be impacted by future adverse changes such as: (i) any future declines in the Company’s operating results, (ii) a decline in the valuation of technology, including the valuation of the Company’s common stock, (iii) a significant slowdown in the worldwide economy or (iv) any failure to meet the performance projections included in the Company’s forecasts of future operating results. In accordance with FASB ASC Topic 350, the Company tests intangible assets for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If the Company’s actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, it could incur additional impairment charges in a future period. Based on such evaluations, there was no impairment recorded for intangible assets for the six months ended December 31, 2014 and 2013, respectively.

8

---

Construction in Progress

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

The Company reviews the carrying value of construction in progress for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, there was no impairment recorded for construction in progress for the six months ended December 31, 2014 and 2013, respectively.

Translation of Foreign Currencies

Humankind, Huimeijia and HLJ Huimeijia maintain their books and accounting records in PRC currency “Renminbi” (“RMB”), which has been determined as the functional currency. Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates prevailing on the date of the transactions, as quoted by the Federal Reserve Board. Foreign currency exchange gains and losses resulting from these transactions are included in operations.

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

Revenue Recognition

The Company recognizes revenue when it is both earned and realized or realizable. The Company’s policy is to recognize revenue when title to the product, ownership and risk of loss have transferred to the customer, persuasive evidence of an arrangement exits and collection of the sales proceeds is reasonably assured, all of which generally occur upon shipment of goods to customers. The majority of the Company’s revenue relates to the sale of inventory to customers, and revenue is recognized when title and the risks and rewards of ownership pass to the customer. Given the nature of the Company’s business and the applicable rules guiding revenue recognition, the Company’s revenue recognition practices do not contain estimates that materially affect the results of operations. The Company records revenue at the discounted selling price and allows its customers to return products for exchange or credit subject to certain limitations. A provision for such returns is recorded based upon historical experience. There has been no provision recorded for returns based upon historical experience for the six months ended December 31, 2014 and 2013, respectively.

Cost of Goods Sold

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

Income Taxes

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

9

---

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

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

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

Enterprise Income Tax

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

Value Added Tax

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

Value added tax payable in the PRC is charged on an aggregated basis at a rate of 13% or 17% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 17% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of value added tax included in the price or charges, and less any deductible value added tax already paid by the taxpayer on purchases of goods and services in the same financial year. As of December 31, 2014 and June 30, 2014, value added taxes payable were $282,557 and $287,441, respectively.

Sales Taxes and Sales-Related Taxes

Pursuant to the tax law and regulations of the PRC, the Company is obligated to pay 7% and 5% of the annual VAT paid as taxes on maintaining and building cities and education additional fees, both of which belong to sales-related taxes. Sales-related taxes are recorded when sales revenue is recognized. Sales taxes and sales-related taxes for the six months ended December 31, 2014 and 2013 were $110,066 and $65,121, respectively.

Concentrations of Business and Credit Risks

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

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

10

---

Earnings Per Share

Basic earnings per common share is computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding during the period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. For the six months ended December 31, 2014 and 2013, the Company had no potential dilutive common stock equivalents outstanding.

Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period. FASB ASC Topic 260, “Earnings Per Share”, requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations.

Recent Accounting Pronouncements

On November 3, 2014, the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force)”.The amendments permit the use of the Fed Funds Effective Swap Rate (also referred to as the Overnight Index Swap Rate, or OIS) as a benchmark interest rate for hedge accounting purposes. Public business entities are required to implement the new requirements in fiscal years (and interim periods within those fiscal years) beginning after December 15, 2015. All other types of entities are required to implement the new requirements in fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. The Company does not expect the adoption to have material impact on the Company's consolidated financial statement.

On November 18, 2014, FASB issued ASU No. 2014-17, “Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force)”, which allows an acquired entity to elect to apply pushdown accounting in its separate financial statements on a change-incontrol event. The acquired entity elects whether to apply pushdown accounting individually for each change-in-control event, and may apply pushdown accounting during the reporting period in which the change-in-control event occurs. Effective November 18, 2014, an acquired entity may apply ASU 2014-17 to future change-in-control events. The Company does not expect the adoption of ASU 2014-17 to have material impact on the Company's consolidated financial statement.

On December 23, 2014, FASB issued Accounting Standards Update (ASU) No. 2014-18, “Accounting for Identifiable Intangible Assets in a Business Combination”. The ASU contains an accounting alternative for private companies that acquire identifiable intangible assets in a business combination. Under the accounting alternative, many customer-related intangible assets and all noncompete agreements would not be recognized separately and would be subsumed into goodwill. An entity that elects this alternative is also required to adopt the alternative accounting in FASB Accounting Standards Update No. 2014-02, Accounting for Goodwill. (However, an entity that elects to adopt the goodwill alternative does not need to adopt the guidance in ASU 2014-18.) ASU 2014-18 does not require an entity to provide any incremental disclosures beyond those required by ASC 805. Once elected, the accounting alternative would be applied to all future business combinations entered into in the first annual period beginning after December 15, 2015. Early adoption would be permitted. The Company does not expect the adoption of ASU 2014-18 to have material impact on the Company's consolidated financial statement.

On January 9, 2015, FASB published ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. The ASU applies to all entities and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have material impact on the Company's consolidated financial statement.

NOTE 3 – ACQUISITION

On November 22, 2013, Humankind completed the acquisition of HLJ Huimeijia for a total purchase price of $16,339,869 (RMB100,000,000) (the “Purchase Price”). HLJ Huimeijia was founded on October 30, 2003. HLJ Huimeijia is engaged in the manufacturing and distribution of tincture, ointments, rubber paste (including hormones), solution (topical), suppositories, liniment (including traditional Chinese medicine extraction), enemas and oral liquid. HLJ Huimeijia’s predecessor is Heilongjiang Xue Du Pharmaceutical Co., Ltd., which had established its brand name in the market by its medical products. HLJ Huimeijia is categorized as a “high and new technology” enterprise by the Science Technology Department in Heilongjiang Province. HLJ Huimeijia has 21 products which have been approved by, and have received approval numbers issued by, the China State Food and Drug Administration (“CFDA”). In addition, HLJ Huimeijia is a holder of one patent for utility models, five patents for external design and two trademarks in China, including the Chinese brand name of “Xue Du” that has an established reputation among customers in northeastern China.

11

---

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

NOTE 4 – ASSETS SALE

On December 24, 2014, Humankind entered into a stock transfer agreement (the “Agreement”) with Xiuzheng Pharmaceutical Group Co., Ltd. a company incorporated under the laws of the People’s Republic of China and located in Jilin province (“Xiuzheng Pharmacy” or the “Buyer”), Mr. Xin Sun, the CEO of the Company, and Huimeijia, pursuant to which, Humankind and Mr. Xin Sun (the “Equity Holders”), shall sell their respective equity interests in Huimeijia to Xiuzheng Pharmacy. The transfer of the 100% equity interests of Huimeijia to the Buyer was for a total cash consideration of RMB 8,000,000 (approximately $1,306,186) to the Equity Holders.

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.

In the event that the Assets are failed to be transferred to the Buyer due to the fault of the Assets Transferors, the paid consideration shall be returned to the Buyer with interests accrued. If the failure of the transfer of the Assets is a result of the government policy changes or force majeure, the paid cash consideration shall be returned to the Buyer but without any interests.

As of December 31, 2014, the transfer of the Assets had not been completed.

NOTE 5 - ACCOUNTS RECEIVABLE

The Company’s accounts receivable amounted to $1,989,926 and $2,230,746, respectively, net of allowance for doubtful accounts amounting to $44,845 and $45,463 as of December 31, 2014 and June 30, 2014, respectively.

NOTE 6 - INVENTORIES

Inventory consists of following:

		December 31, 2014			June 30, 2014
Raw Materials	$	446,490		$	524,446
Supplies and Packing Materials		14,084			10,485
Work-in-Progress		256,418			248,304
Finished Goods		191,160			254,704
Total	$	908,152		$	1,037,939

For the six months ended December 31, 2014 and 2013, the Company has not made provision for inventory in regards to slow moving or obsolete items.

NOTE 7 - CONSTRUCTION IN PROGRESS

Construction in progress consisted of the following:

12

---

		December 31, 2014			June 30, 2014
Plant - HLJ Huimeijia	$	532,566		$	-
Plant and Production Lines - Huimeijia		1,934			1,934
Total	$	534,500		$	1,934

On April 6, 2012, HLJ Huimeijia entered into an agreement with a contractor for the plant, the estimated total cost of construction was approximately $2.09 million (RMB 12,800,000), anticipated to be completed within 720 construction working days from April 20, 2012 to December 30, 2015. As of December 31, 2014, 26% of construction had been completed and $532,566 (RMB 3,304,360) had been recorded as a cost of construction in progress.

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

		December 31, 2014			June 30, 2014
Building, Warehouses and Improvements	$	4,646,130		$	4,646,879
Machinery and Equipment		1,232,408			1,231,702
Office Equipment		110,110			108,112
Vehicles		232,338			231,570
Other		24,176			24,180
Less Accumulated Depreciation		(1,748,739	)		(1,581,371	)
Total	$	4,496,423		$	4,661,072

Depreciation expense was $168,954 and $142,170 for the six months ended December 31, 2014 and 2013, respectively. Depreciation expense charged to operations was $64,063 and $58,450 for the six months ended December 31, 2014 and 2013, respectively. Depreciation expense charged to cost of goods sold was $104,891 and $83,720 for the six months ended December 31, 2014 and 2013, respectively.

As of December 31, 2014, the building of HLJ Huimeijia in the book value of $1,795,877 had been mortgaged for the working capital loan in the principal amount of $1,611,707 (RMB 10,000,000). As of June 30, 2014, the building of HLJ Huimeijia in the book value of $1,796,166 had been mortgaged for the working capital loan in the principal amount of $1,611,967 (RMB 10,000,000).

NOTE 9 - INTANGIBLE ASSETS

The following is a summary of intangible assets:

		December 31, 2014			June 30, 2014
Land Use Rights – Humankind	$	1,021,498		$	1,021,662
Health Supplement Product Patents – Humankind		4,835,122			4,835,901
Pharmaceutical Patents - HLJ Huimeijia		144,406			144,430
Land Use Rights - HLJ Huimeijia		698,689			698,802
Less: Accumulated Amortization		(1,525,764	)		(1,248,634	)
Total	$	5,173,951		$	5,452,161

All land in the PRC belongs to the State. Enterprises and individuals can pay the State a fee to obtain the right to use a piece of land for commercial purposes or residential purposes for an initial period of 50 years or 70 years, respectively. The land use right can be sold, purchased, and exchanged in the market. The successor owner of the land use right will have the right to use the land for the time remaining on the initial period.

Amortization expense charged to operations was $279,533 and $457,870 for the six months ended December 31, 2014 and 2013, respectively.

As of December 31, 2014, land use rights of HLJ Huimeijia with the book value of $698,689 had been mortgaged for a working capital loan in the principal amount of $1,611,707 (RMB 10,000,000). As of June 30, 2014, land use rights of HLJ Huimeijia with a book value of $698,802 had been mortgaged for a working capital loan in the principal amount of $1,611,967 (RMB 10,000,000).

NOTE 10 - SHORT-TERM LOAN

On November 20, 2014, HLJ Huimeijia entered into a short-term loan agreement with a bank for a working capital loan in the principal amount of RMB 10,000,000, at an interest rate of 7.8% from November 20, 2014 to November 19, 2015. The loan was secured by the land use right and the building of HLJ Huimeijia, with a maturity date of November 19, 2015. As of December 31, 2014 and June 30, 2014, the Company’s short-term loan was $1,611,707 and $1,611,967, respectively.

13

---

Interest expenses were $62,198 and $44,003 for the six months ended December 31, 2014 and 2013, respectively.

NOTE 11 - RELATED PARTY DEBTS

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

		December 31, 2014			June 30, 2014
Mr. Xin Sun	$	1,658,532		$	1,739,157
Mr. Kai Sun		15,546			37,694
Total	$	1,674,078		$	1,776,851

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

NOTE 12 - INCOME TAXES

(a) Corporate income taxes

United States

China Health US was organized in the United States. China Health US had no taxable income for US income tax purposes for the years ended June 30, 2014 and 2013, respectively. As of December 31, 2014, China Health US has a net operating loss carry forward for United States income taxes. Net operating loss carry forwards are available to reduce future years’ taxable income. Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s operating history and the continued losses of the US entity. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. There were no changes in the valuation allowance for the six months ended December 31, 2014 and 2013. Management reviews this valuation allowance periodically and makes adjustments accordingly.

Hong Kong

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

People’s Republic of China

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

The provision for income taxes on income consists of the following for the three months ended September 30, 2014 and 2013:

Provision for income taxes consisted of:

		For the Six Months Ended December 31,
		2014			2013
Current provision :
USA	$	-		$	-
China		160,538			-
Total current provision		160,538			-
Deferred provision:
USA		-			-
China		-			-
Total deferred provision		-			-
Total provision for income taxes	$	160,538		$	-

Significant components of deferred tax assets were as follows:

14

---

		December 31, 2014			June 30, 2014
Deferred tax assets
Net operating loss carry forward	$	339,530		$	322,469
Allowance for doubtful accounts		154			108
Valuation allowance		(339,684	)		(322,577	)
Deferred tax assets, net	$	-		$	-

As of December 31, 2014 and June 30, 2014, the Company accrued a 100% valuation allowance on its deferred tax assets based on the assessment on the probability of future reversion.

(b) Uncertain tax positions

There were no unrecognized tax benefits as of December 31 and June 30, 2014, respectively. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its tax positions. For the six months ended December 31, 2014 and 2013, the Company did not incur any interest and penalties arising from its tax payments.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

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

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

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

NOTE 1 4 - MAJOR SUPPLIERS AND CUSTOMERS

The Company had one supplier that in the aggregate accounted for 64% of the Company’s purchases for the six months ended December 31, 2014.

The Company had three customers that in the aggregate accounted for 32% of the Company’s total sales for the six months ended December 31, 2014, with each customer accounting for 11%, 11% and 10%, respectively.

The Company had one supplier accounted for 85% of the Company’s purchases for the six months ended December 31, 2013.

The Company had four customers that in the aggregate accounted for 47% of the Company’s total sales for the six months ended December 31, 2013, with each customer accounting for 13%, 12%, 11% and 11%, respectively.

NOTE 15 - SEGMENT REPORTING

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

The following tables’ present summary information by segment for the six months ended December 31, 2014 and 2013, respectively:

15

---

		As of and For the Six Months Ended December 31, 2014												As of and For the Six Months Ended December 31, 2013
		HLJ												HLJ
		Huimeijia			Humankind			Others			Consolidated			Huimeijia			Humankind			Others			Consolidated
Revenues	$	962,690			5,315,089			-			6,277,779			750,982			3,194,822			-			3,945,804
Cost of revenues		693,176			3,700,200			-			4,393,376			524,559			2,724,676			-			3,249,235
Gross profit		269,514			1,614,889			-			1,884,403			226,423			470,146			-			696,569
Interest expense		62,198			-			-			62,198			44,003			-			-			44,003
Depreciation and amortization		31,267			312,329			-			343,596			219,894			317,655			7,050			544,599
Income tax		-			160,538			-			160,538			-			-			-			-
Net income (loss)		(151,234	)		481,614			(125	)		330,255			(345,538	)		(653,288	)		(7,177	)		(1,006,003	)
Total capital expenditures		2,943			812			-			3,755			37,726			64,834			-			102,560
Total assets		3,404,941			38,107,153			27,5944			41,539,688			24,762			41,401,059			170,468			41,596,289
Non-controlling interests	$	-			-			254			254			-			-			250			250

		As of and For the Three Months Ended December 31, 2014												As of and For the Three Months Ended December 31, 2013
		HLJ												HLJ
		Huimeijia			Humankind			Others			Consolidated			Huimeijia			Humankind			Others			Consolidated
Revenues	$	554,816			2,562,746			-			3,117,562			447,248			1,809,038			-			2,256,286
Cost of revenues		403,099			1,776,314			-			2,179,413			319,807			1,397,988			-			1,717,795
Gross profit		151,717			786,432			-			938,149			127,441			411,050			-			538,491
Interest expense		32,240			-			-			32,240			21,223			-			-			21,223
Depreciation and amortization		8,280			145,872			-			154,152			194,267			118,078			7,050			319,395
Income tax		-			58,359			-			58,359			-			-			-			-
Net income (loss)		(68,209	)		175,074			(54	)		106,811			(283,123	)		2,197			(7,104	)		(288,030	)
Total capital expenditures		503			812			-			1,315			36,111			64,834			-			100,945
Total assets		3,404,941			38,107,15			27,594			41,539,688			24,762			41,401,059			170,468			41,596,289
Non-controlling interests	$	-			-			254			254			-			-			250			250

NOTE 16 - SUBSEQUENT EVENTS

On February 9, 2015, Humankind, Xiuzheng Pharmacy, Mr. Xin Sun and Huimeijia entered into the Supplementary Agreement to modify the terms of the Agreement which was entered into on December 24, 2014. Please refer to “NOTE 4 – ASSETS SALE”.

16

---

Item 2.           Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD LOOKING STATEMENTS

We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under 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;

• 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 (“Humankind”) and indirect 99% owned subsidiary, Harbin Huimeijia Medicine Company and indirect wholly owned subsidiary, Heilongjiang Huimeijia Pharmaceutical Co., Ltd. (“HLJ Huimeijia”). 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.

17

---

Business Overview

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

Our business is conducted through our sales agents and sales personnel. 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 are generated. Our sales through agents in Zhejiang, Beijing and Jiangsu provinces accounted for 11%, 11%, and 10% of our total sales, respectively, for the six months ended December 31, 2014. Although we do not currently sell our products online, we expect to do so in the future.

Results of Operations

The following table summarizes the top lines of the results of our operations for the three months ended December 31, 2014 and 2013, respectively:

		December 31, 2014			December 31, 2013			Variance			%
Revenues	$	3,117,562		$	2,256,286		$	861,276			38.17%
Humankind		2,562,746			1,809,038			753,708			41.66%
HLJ Huimeijia		554,816			447,248			107,568			24.05%
Cost of Goods Sold	$	2,179,413		$	1,717,795		$	461,618			26.87%
Humankind		1,776,314			1,397,988			378,326			27.06%
HLJ Huimeijia		403,099			319,807			83,292			26.04%
Gross Profit	$	938,149		$	538,491		$	399,658			74.22%
Humankind		786,432			411,050			375,382			91.32%
HLJ Huimeijia		151,717			127,441			24,276			19.05%

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.

Our total cost of sales increased $461,618 or 26.87% for the three months ended December 31, 2014 as compared to the same period in 2013. The increase in cost of sales was primarily due to an increase of $378,326 or 27.06% in Humankind’s cost of sales and an increase of $83,292 or 26.04% in HLJ Huimeijia’s cost of sales for the three months ended December 31, 2014 as compared to the same period in 2013. This increase was primarily due to the increase in sales volume.

Our gross profit increased $399,658 from $538,491 for the three months ended December 31, 2013 to $938,149 for the three months ended December 31, 2014. This increase was attributable to the enhanced sales prices of our two primary products and the increase in sales volume. The sales prices of Waterlilies Soft Capsule (Sailuozhi) increased $128 from $256 for the three months ended December 31, 2013 to $385 for the three months ended December 31, 2014, and the sales prices of Propolis and Black Ant Capsule increased $46 from $123 for the three months ended December 31, 2013 to $169 for the three months ended December 31, 2014. The sales volume in Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule increase 4,853 and 8,923 for the three months ended December 31, 2014 as compared to the same period in 2013, respectively.

18

---

Sales by Product Line

The following table summarizes a breakdown of our sales by major product line for the three months ended December 31, 2014 and 2013, respectively:

Operating Expenses

The following table summarizes our operating expenses for the three months ended December 31, 2014 and 2013, respectively:

		December 31, 2014			December 31, 2013			Variance			%
Operating Expenses
Selling, general and administrative	$	591,670		$	520,003		$	71,667			13.78%
Depreciation and amortization		154,152			319,395			(165,243	)		-51.74%
Research and development		0			445			(445	)		-100.00%
Total Operating Expenses	$	745,822		$	839,843		$	(94,021	)		-11.20%

19

---

Total operating expenses for the three months ended December 31, 2014 decreased $94,021, or 11.20%, as compared to the corresponding period in 2013. The decrease in operating expenses was primarily attributable to a decrease of $165,243, or 51.74%, in depreciation and amortization results from the accrued amortization complementally for land use right for the previous years before December 31, 2013.

Interest Income and Interest Expense

Interest income was $24,459 for the three months ended December 31, 2014, as compared to $24,808 for the three months ended December 31, 2013. This decrease of $349, or 1.41%, was primarily due to the decrease in the average balance of deposits in the bank.

Interest expense was $32,240 for the three months ended December 31, 2014, as compared to $21,223 for the three months ended December 31, 2013. This increase of $11,017 or 51.91% was primarily due to the increase in short-term loan. The average daily short-term loans were $1,626,890 and $1,268,219 for the three months ended December 31, 2014 and 2013, respectively.

Income Taxes

Income taxes increased $58,359, or 100%, from $0 for the three months ended December 31, 2013 to $58,359 for the three months ended December 31, 2014. This was due to the Company’s loss before income taxes for the three months ended December 31, 2013 which resulted in $0 income tax for that period

Net Income (Loss) and Income (Loss) Per Share

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.

The following table summarizes the top lines of the results of our operations for the six months ended December 31, 2014 and 2013, respectively:

		December 31, 2014			December 31, 2013			Variance			%
Revenues	$	6,277,779		$	3,945,804		$	2,331,975			59.10%
Humankind		5,315,089			3,194,822			2,120,267			66.37%
HLJ Huimeijia		962,690			750,982			211,708			28.19%
Cost of Goods Sold	$	4,393,376		$	3,249,235		$	1,144,141			35.21%
Humankind		3,700,200			2,724,676			975,524			35.80%
HLJ Huimeijia		693,176			524,559			168,617			32.14%
Gross Profit	$	1,884,403		$	696,569		$	1,187,834			170.53%
Humankind		1,614,889			470,146			1,144,743			243.49%
HLJ Huimeijia		269,514			226,423			43,091			19.03%

Revenue

Total revenues increased by $2,331,975, or 59.10%, for the six months ended December 31, 2014 as compared to the same period in 2013. The increase in revenues was primarily due to an increase of $2,120,267 or 66.37% in Humankind’s revenues and an increase of $211,708 or 28.19% in HLJ Huimeijia’s revenues for the six 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 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 six months ended December 31, 2014.

20

---

Our total cost of sales increased $1,144,141 or 35.21% for the six months ended December 31, 2014 as compared to the same period in 2013. The increase in cost of sales was primarily due to an increase of $975,524 or 35.80% in Humankind’s cost of sales and an increase of $168,617 or 32.14% in HLJ Huimeijia’s cost of sales for the six months ended December 31, 2014 as compared to the same period in 2013. This increase was primarily due to the increase in sales volume.

Our gross profit increased $1,187,834 from $696,569 for the six months ended December 31, 2013 to $1,884,403 for the six months ended December 31, 2014. This increase was attributable to the enhanced sales prices of our two primary products and the increase in sales volume. The sales prices of Waterlilies Soft Capsule (Sailuozhi) increased $128 from $256 for the six months ended December 31, 2013 to $385 for the six months ended December 31, 2014, and The sales prices of Propolis and Black Ant Capsule increased $46 from $123 for the six months ended December 31, 2013 to $169 for the six months ended December 31, 2014. The sales volume in Waterlilies Soft Capsule (Sailuozhi) and Propolis and Black Ant Capsule increase 11,357 and 23,753 for the six months ended December 31, 2014 as compared to the same period in 2013, respectively.

Sales by Product Line

The following table summarizes a breakdown of our sales by major product line for the six months ended December 31, 2014 and 2013, respectively: