China Health Industries Holdings, Inc. - Quarter Report: 2009 March (Form 10-Q)

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20-549

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 March 31, 2009

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

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 (State or other jurisdiction of incorporation or organization)		86-0827216 (I.R.S. Employer Identification No.)

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

011-86-451 8989 1246

(Registrant’s telephone number, including area code)

Universal Fog, Inc.

Former Fiscal Year: December 31

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed 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 ¨ 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” ion Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨	Smaller reporting company x

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 ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of May 14, 2009, there are 62,234,737 shares of $0.0001 par value common stock issued and outstanding.

FORM 10-Q

TIA I, INC.

INDEX

		Page
PART I	FINANCIAL INFORMATION	3

	Item 1. Financial Statements (Unaudited).	3

	Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and June 30, 2008.	3

	Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and March 31, 2008 and the Nine Months Ended March 31, 2009 and 2008 (Unaudited).	4

	Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months ended March 31, 2009 (Unaudited).	5

	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2009 and 2008 (Unaudited).	6

	Notes to Financial Statements.	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and results of Operations.	9

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	13

	Item 4. Controls and Procedures.	14

PART II	OTHER INFORMATION	15

	Item 1. Legal Proceedings.	15

	Item 1A. Risk Factors.	15

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	15

	Item 3. Defaults Upon Senior Securities.	15

	Item 4. Submission of Matters to a Vote of Security Holders.	15

	Item 5. Other Information.	15

	Item 6. Exhibits	15

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CHINA HEALTH INDUSTRIES HOLDINGS, INC.

(formerly Universal Fog, Inc.)

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31,			June 30,
	2009			2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	86,762		$	35,251
Accounts receivable		109,875			-
Inventory		178,285			107,125
Prepaid expenses		33,969			34,944
Total current assets		408,891			177,320

Property and equipment, net of accumulated depreciation of $111,051 and $68,841, respectively		1,058,457			1,075,564
Intangible assets, net of accumulated amortization of $88,568 and $76,720, respectively		1,146,134			1,152,925

TOTAL ASSETS	$	2,613,482		$	2,405,809

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	451,670		$	460,641
Related party debt		576,189			549,982
Total current liabilities		1,027,859			1,010,623

STOCKHOLDERS' EQUITY
Common stock, $0.0001 par value, 300,000,000 shares authorized, 62,234,737 and 61,203,088 shares issued and outstanding, respectively		6,223			6,120
Additional paid-in-capital		1,384,552			342,490
Accumulated other comprehensive income		251,658			246,004
Accumulated deficit		(56,810	)		(199,428	)
Total stockholders' equity		1,585,623			1,395,186

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,613,482		$	2,405,809

See accompanying notes to the consolidated financial statements.

CHINA HEALTH INDUSTRIES HOLDINGS, INC.

(formerly Universal Fog, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2009			2008		2009			2008

REVENUE	$	1,015,480		$	333,271	$	1,438,124		$	346,490
COST OF GOODS SOLD		686,362			250,294		1,056,174			266,491
Gross profit		329,118			82,977		381,950			79,999

OPERATING EXPENSES
Selling, general and administrative		39,665			20,170		89,109			54,595
Depreciation and amortization		15,864			15,672		42,310			40,560
Total operating expenses		55,529			35,842		131,419			95,155
Operating profit (loss)		273,589			47,135		250,531			(15,156	)

OTHER INCOME (EXPENSES)
Interest income		100			118		326			146
Interest expenses		(10,761	)		-		(40,708	)		-
Other income		-			315		150			312
Other expenses		(1	)		-		(146	)		-

INCOME (LOSS) BEFORE INCOME TAXES		262,927			47,568		210,153			(14,698	)
Income tax expense		65,123			-		67,535			-
Net income (loss)		197,804			47,568		142,618			(14,698	)

OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss)		(1,896	)		97,355		5,654			125,917
Comprehensive income	$	195,908		$	144,923	$	148,272		$	111,219

Basic and diluted net income (loss) per share	$	0.00		$	0.00	$	0.00		$	(0.00	)

Weighted average shares outstanding - basic and diluted		62,234,737			61,203,088		61,541,951			61,203,088

See accompanying notes to the consolidated financial statements.

CHINA HEALTH INDUSTRIES HOLDINGS, INC.

(formerly Universal Fog, Inc.)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

											Accumulated
					Additional						Other
	Common Stock				Paid-in			Accumulated			Comprehensive
	Shares		Amount		Capital			Deficit			Income		Total

Balances, June 30, 2008		61,203,088	$	6,120	$	1,342,490		$	(199,428	)	$	246,004	$	1,395,186
Shares issued to minority holders in reverse merger		1,031,649		103		(103	)		-			-		-
Contributed capital		-		-		1,464			-			-		1,464
Imputed interest on shareholder loan		-		-		40,701			-			-		40,701
Net income		-		-		-			142,618			-		142,618
Other comprehensive income		-		-		-			-			5,654		5,654
Balances, March 31, 2009		62,234,737	$	6,223	$	1,384,552		$	(56,810	)	$	251,658	$	1,585,623

CHINA HEALTH INDUSTRIES HOLDINGS, INC.

(formerly Universal Fog, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	March 31,
	2009			2008

Cash flows from operating activities:
Net income (loss)	$	142,618		$	(14,698	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		53,436			40,560
Imputed interest		40,701			-
Changes in operating assets and liabilities:
Accounts receivable		-			(5,790	)
Inventory		(71,160	)		(36,416	)
Prepaid expenses		975			(92,415	)
Accounts payable & other current liabilities		6,776			361,019
Net cash provided by operating activities		173,346			252,260

Cash flows from investing activities:
Notes receivable		(109,875	)		-
Purchases of patents, property and equipment		(36,147	)		(246,919	)
Net cash used in investing activities		(146,022	)		(246,919	)

Cash flows from financing activities:
Contributed capital		1,464			-
Proceeds from related party debt		26,207			152,169
Net cash provided by financing activities		27,671			152,169

Effects of foreign exchange on cash		(3,484	)		(86,536	)

Net increase in cash and cash equivalents		51,511			70,974
Cash and cash equivalents, at beginning of year		35,251			8,297
Cash and cash equivalents, at end of year	$	86,762		$	79,271

Supplemental disclosures of cash flow information:
Interest paid	$	-		$	-
Income taxes paid		-			-

Noncash investing and financing activities:
Fixed assets purchased on account	$	-		$	12,520
Adjustment of fixed asset value		15,747			-

See accompanying notes to the consolidated financial statements.

CHINA HEALTH INDUSTRIES HOLDINGS, INC.

(formerly Universal Fog, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 – BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of China Health Industries Holdings, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the Company’s audited 2008 annual financial statements and notes thereto filed with the SEC on Form PRER14C by the Company on October 2, 2008. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the result of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure required in the Company’s 2008 annual financial statements have been omitted.

Note 2 - GOING CONCERN

The Company had an accumulated deficit of $56,810 and a working capital deficit of $618,968 as of March 31, 2009. This raises substantial doubt about the Company’s ability to continue as a going concern.

Management has taken actions to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

During the period from December 14, 2003 (inception) through March 31, 2009, the Company relied heavily for its financing needs on its majority owner; Mr. Xin Sun. Loans from Mr. Sun are described in Note 5 to the unaudited consolidated financial statements.

Note 3 - CONTROL BY PRINCIPAL OWNERS

The directors, executive officers, their affiliates and related parties own, beneficially and in the aggregate, the majority of the voting power of the outstanding capital of the Company. Accordingly, if directors, executive officers and their affiliates, voted their shares uniformly, they would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital stock and the dissolution, merger or sale of the Company’s assets.

Note 4 - INVENTORY

Inventories consisted of the following at March 31, 2009 and June 30, 2008:

	March 31, 2009		June 30, 2008

Raw materials	$	149,857	$	82,650
Supply and packing materials		28,414		24,461
Work-in-progress		-		-
Finished products		14		14

Total	$	178,285	$	107,125

Note 5 - RELATED PARTY DEBT

“Related party debt" represents temporary short-term loans from majority owner, Mr. Sun Xin, a PRC citizen. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, and are therefore, deemed payable on demand. Cash flows classified as proceeds from related party debt are classified as cash flows from financing activities. The total borrowings from Mr. Sun were $576,189 and $549,982 as of March 31, 2009 and June 30, 2008, respectively.

Interest was imputed on the loans using the Chinese bank borrowing rate of 7.47%. The total imputed interest expense for the nine months ended March 31, 2009 was $40,701.

Note 6 - 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 PRC are still owned by the Chinese government. For example, all lands are state owned and are leased to business entities or individuals through governmental granting of Land Use Rights. The granting process is typically based on government policies at the time of granting and it could be lengthy and complex. This process may adversely affect our company’s future manufacturing expansions. The Chinese government also exercises significant control over 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 and 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 7 - NEW SUBSIDIARY

On October 14, 2008, Harbin Humankind set up a 99% owned subsidiary with its primary business being manufacturing and distributing medicine. Mr. Xin Sun, the Company’s majority owner, owns 1% interest of this subsidiary. The subsidiary is consolidated in the consolidated financial statements of the Company.

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

The following discussion of the financial condition and results of operation of the Company for the nine and three months ended March 31, 2009 and 2008 should be read in conjunction with the selected financial data, the financial statements and the notes to those statements that are included elsewhere in this Current Report on Form 10-Q (“Form 10-Q”).

Cautionary Note Regarding 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. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 Form 10-Q 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, and its wholly owned subsidiary, Harbin Humankind Biology Technology Co. Limited. 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 Yuan Renminbi 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.

Company Overview

We were 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, 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 to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous operation since 1996) became a wholly-owned subsidiary of Edmonds 6.

We began manufacturing systems for outdoor cooling in Arizona and quickly expanded to distribute throughout the United States. Our primary product was a misting system which consisted of a high pressure pump assembled to specifications.

China Health Industries Holdings Limited ("China Health") was incorporated on July 20, 2007 in Hong Kong under the Companies Ordinance as a limited liability company. China Health 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 the Statement of Financial Accounting Standards (SFAS) No. 7.

Harbin Humankind Biology Technology Co., Limited ("Harbin 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. The Company is engaged in the business of production and distribution of healthcare and beauty products. Harbin Humankind has a wholly-owned subsidiary, Harbin Huimeijia Medicine Company ("Huimeijia"), which was incorporated on October 14, 2008. Huimeijia will be producing and selling our medical drugs after it has been GMP certified.

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

On December 31, 2008, China Health closed a reverse merger with Universal Fog, Inc, a U.S. public traded shell company. China Health is the accounting acquirer in the transaction and the transaction is treated as a recapitalization of the Company. After the transaction and a 1:20 reverse stock split, 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 the Company. 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 the Company, or approximately 53.03%. We changed our name from "Universal Fog, Inc." to "China Health Industries Holdings, Inc." on February 19, 2009.

Results of Operations

Nine Months Ended March 31, 2009 Compared to the nine Months Ended March 31, 2008

Revenue. Our revenue increased $1,091,634, or 315%, to $1,438,124 for the nine months ended March 31,2009, compared to revenue of $346,490 for the nine months ended March 31, 2008. The significant increase in revenue is directly due to the introduction of two new products. With the new production facilities in place, the development of new production lines and the new marking strategy, our output and sales increased significantly.

Cost of Sales. Our cost of sales increased $789,683, or 296%, to $1,056,174 for the nine months ended March 31, 2009, compared to cost of sales of $266,491 for the nine months ended March 31, 2008. These costs increased as a result of the increased sales, increased labor costs and an increase in depreciation due to newly-purchased machinery.

Gross Profit. We had gross profit of $381,950 for the nine months ended March 31, 2009, an increase of $301,951 or 377% compared to gross profit of $79,999 for the nine months ended March 31, 2008. This increase was primarily attributable to the increase in our revenue which was partly offset by our increase in cost of sales.

Operating Expenses. Operating expenses increased $36,264, or 38%, to $131,419 for the nine months ended March 31, 2009, compared to operating expenses of $95,155 for the nine months ended March 31, 2008. The increase was mainly attributable to increased selling and administrative expenses due to increased sales activities.

Net Income (Loss). Net income for the nine months ended March 31,2009 was $142,618, an increase of $157,316 or 1,070% compared to net loss for the nine months ended March 31, 2008 of $14,698. The increase was primarily attributable to the enlargement of our production scale and development of new production lines as discussed above.

Comprehensive Income. Comprehensive income for the nine months ended March 31, 2009 was $148,272, an increase of $37,053 or 33% compared to comprehensive income for the nine months ended March 31, 2008 of $111,219. The comprehensive income includes the contribution of foreign currency translation gains.

Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

Revenue. Our revenue increased $682,209, or 205%, to $1,015,480 for the three months ended March 31, 2009, compared to revenue of $333,271 for the three months ended March 31, 2008. The significant increase in revenue is directly due to the introduction of two new products. With the new production facilities in place, the development of new production lines and the new marking strategy, our output and sales increased significantly.

Cost of Sales. Our cost of sales increased $436,068, or 174%, to $686,362, for the three months ended March 31, 2009, compared to cost of sale of $250,294 for the three months ended March 31, 2008. These costs increased as a result of the increased sales, increased labor costs and an increase in depreciation due to newly-purchased machinery.

Gross Profit. We had gross profit of $329,118 for the three months ended March 31, 2009, an increase of $246,141 or 297% compared to gross profit of $82,977 for the three months ended March 31, 2008. This increase was primarily attributable to the increase in our revenue which was partly offset by our increase in cost of sales.

Operating Expenses. Operating expenses increased $19,687, or 55%, to $55,529 for the three months ended March 31, 2009, compared to operating expenses of $35,842 for the three months ended March 31, 2008. The increase was mainly attributable to increased selling and administrative expenses due to increased sales activities.

Net Income. Net income for the three months ended March 31, 2009 was $197,804, an increase of $150,236 or 316% compared to net income for the three months ended March 31, 2008 of $47,568. The increase was attributable to the enlargement of our production scale and development of new production lines as discussed above.

Comprehensive Income. Comprehensive income for the three months ended March 31, 2009 was $195,908, an increase of $50,985 or 35% compared to comprehensive income for the three months ended March 31, 2008 of $144,923. The comprehensive income includes the contribution of foreign currency translation gains and losses.

Liquidity and Capital Resources

We had a working capital deficit of $618,968 as of March 31, 2009.

During the nine months ended March 31, 2009, net cash increased by $51,511 or 146%, consisting of $173,346 provided by operating activities, $146,022 used in investment activities, $27,671 provided by financing activities and effects of foreign exchange on cash of $3,484.

Net cash provided by operating activities decreased $78,914 or 31% during the nine months ended March 31, 2009 versus the comparable period in 2008. This decrease was primarily due to changes in working capital associated with the increase in inventory purchases and accounts payable resulting from the increase of production and sales activities as well as the limited payment of vendors in purchase activities.

The primary drivers of cash used in investing activities were capital spending. Cash used in investing activities was $146,022 and $246,919 for the nine months ended March 31, 2009 and 2008, respectively. During the nine months ended March 31, 2009, a total of $36,147 cash outflow was used to purchase new equipment and additions to facilities and $109,875 was lent by us to a possible future customer.

Net cash provided by financing activities for the nine months ended March 31, 2009 consisted of proceeds from related party debt of $26,207, which is a critical source of our working capital funding, and contributed capital of $1,464.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition presented in this section are based upon the audited consolidated financial statements of the Company, including Harbin Humankind, which have been prepared in accordance with the generally accepted accounting principles in the United States. For purposes of this section entitled “Critical Accounting Policies and Estimates,” During the preparation of the financial statements of the Company we were required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to sales, returns, pricing concessions, bad debts, inventories, investments, fixed assets, intangible assets, income taxes and other contingencies. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under current conditions. Actual results may differ from these estimates under different assumptions or conditions.

In response to the SEC’s Release No. 33-8040, “Cautionary Advice Regarding Disclosure about Critical Accounting Policy,” The Company identified the most critical accounting principles upon which its financial status depends. The Company determined that those critical accounting principles are related to the use of estimates, inventory valuation, revenue recognition, income tax and impairment of intangibles and other long-lived assets. The Company presents these accounting policies in the relevant sections in this management’s discussion and analysis, including the Recently Issued Accounting Pronouncements discussed below.

Revenue Recognition. The Company recognizes revenue when the earnings process is complete. This generally occurs when products are shipped to unaffiliated customer or services are performed in accordance with terms of the agreement, title and risk of loss have been transferred, collectability is reasonably assured and pricing is fixed or determinable. Accruals are made for sales returns and other allowances based on the Company’s experience

Accounts Receivable, Trade and Allowance for Doubtful Accounts. The Company’s business operations are conducted in the PRC. During the normal course of business, the Company extends unsecured credit to its customers. Management reviews accounts receivable on a regular basis to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable. At December 31, 2008, and 2007, no allowances for doubtful accounts were accrued.

Inventories. Inventories are stated at the lower of cost or market using the weighted average method. The Company reviews its inventory on a regular basis for possible obsolete goods or to determine if any reserves are necessary for potential obsolescence. As of March 31, 2009 and 2008, the Company has determined that no reserves are necessary.

Impairment of Long-Lived Assets. The Company reviews all of its long-lived assets, including tangible and intangible long-lived assets, for impairment indicators at least annually and performs detailed impairment testing for all long-lived assets whenever impairment indicators are present. When necessary, the Company records charges for impairments of long-lived assets for the amount by which the present value of future cash flows, or some other fair value measure, is less than the carrying value of these assets.

Off-Balance Sheet Arrangements. The Company has not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. The Company has not entered into any derivative contracts that are indexed to China the Company’s shares and classified as shareholder’s equity or that are not reflected in the Company’s financial statements. Furthermore, The Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to the Company or engages in leasing, hedging or research and development services with the Company.

Income Taxes. The Company has adopted Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). SFAS 109 requires the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consist of taxes currently due plus deferred taxes. Since the Company had no operations within the United States there is no provision for US income taxes and there are no deferred tax amounts as of March 31, 2009 and 2008. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and the Company intends to settle current tax assets and liabilities on a net basis.

Recently Issued Accounting Pronouncements

The Company does not believe the recently issued accounting pronouncements would have a material impacts on its financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of our Disclosure Controls

As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have evaluated the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our management, including the CEO and CFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon their controls evaluation, our CEO and CFO have concluded that our Disclosure Controls are effective at a reasonable assurance level.

Changes in internal control over financial reporting

There have been no changes in our internal controls over financial reporting during our third fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There is no material legal proceeding pending against us.

Item 1A. Risk Factors

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

Exhibit No.	SEC Ref. No.	Title of Document

1	31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

2.	31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

3	32.1	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

4	32.2	Certification of the Principal Financial Officer pursuant to U.S

* The Exhibits attached to this Form 10-Q shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CHINA HEALTH INDUSTRIES HOLDINGS, INC.

Date: May 14, 2009
	/s/ Xin Sun
	Xin Sun
	Chief Executive Officer and Chief Financial Officer