SEC Form 10-Q filed by China Pharma Holdings Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from ____________ to ____________
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) | |
|
|
| |
| (Address of principal executive offices) | (Zip Code) | |
(China)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted 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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
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| Smaller reporting company Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 14, 2025, there
were
CHINA PHARMA HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| Page | ||
| PART I FINANCIAL INFORMATION | 1 | |
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 23 |
| Item 4. | Controls and Procedures | 23 |
| PART II OTHER INFORMATION | 24 | |
| Item 6. | Exhibits | 24 |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CHINA PHARMA HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
1
CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Banker’s acceptances | ||||||||
| Trade accounts receivable, less allowance for credit | ||||||||
| losses of $ | ||||||||
| Other receivables, less allowance for doubtful | ||||||||
| accounts of $ | ||||||||
| Advances to suppliers | ||||||||
| Inventories | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Trade accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Other payables | ||||||||
| Contract liabilities | ||||||||
| Borrowings from related parties | ||||||||
| Lease liabilities | ||||||||
| Current portion of lines of credit | ||||||||
| Total Current Liabilities | ||||||||
| Non-current Liabilities: | ||||||||
| Lines of credit, net of current portion | ||||||||
| Deferred tax liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 9) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Securities purchase agreement receivable | ( | ( | ) | |||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross loss | ( | ) | ( | ) | ||||
| Operating expenses: | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Credit gains | ( | ) | ( | ) | ||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Net other expense | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Other comprehensive income (loss) - foreign currency translation adjustment | ( | ) | ||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share: | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balance as of December 31, 2023 | ( | ) | ||||||||||||||||||||||
| Conversions of Note Payable to common stock | ||||||||||||||||||||||||
| Issuances of common stock for intangible assets | ||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ( | ) | ||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Securites | Accumulated | |||||||||||||||||||||||||||
| Additional | Purchase | Other | Total | |||||||||||||||||||||||||
| Common Stock | Paid-in | Agreement | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Deficit | Income | Equity | ||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Depreciation and amortization | ||||||||
| Credit gains | ( | ) | ( | ) | ||||
| Inventory write off | ||||||||
| Changes in assets and liabilities: | ||||||||
| Trade accounts and other receivables | ( | ) | ||||||
| Advances to suppliers | ( | ) | ||||||
| Inventories | ||||||||
| Trade accounts payable | ( | ) | ||||||
| Other payables and accrued expenses | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Advances for intangible assets | ( | ) | ||||||
| Net Cash used in Investing Activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Payments of line of credit | ( | ) | ||||||
| Interest payable to related party | ||||||||
| Net Cash (Used In) Provided By Financing Activities | ( | ) | ||||||
| Effect of Exchange Rate Changes on Cash | ( | ) | ( | ) | ||||
| Net Decrease in Cash and Cash Equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents at Beginning of Year | ||||||||
| Cash and Cash Equivalents at End of Year | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental Noncash Investing and Financing Activities: | ||||||||
| Conversions of Note Payable and interest to common stock | ||||||||
| Issuances of stock for intangible assets | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations – China
Pharma Holdings, Inc., a Nevada corporation (“China Pharma”), owns
Onny acquired
Helpson is principally engaged in the development, manufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases and medical conditions prevalent in the PRC. All of its operations are conducted in the PRC, where its manufacturing facilities are located. Helpson manufactures pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions. The majority of its pharmaceutical products are sold on a prescription basis and all have been approved for at least one or more therapeutic indications by the National Medical Products Administration (the “NMPA”, formerly China Food and Drug Administration, or CFDA) based upon demonstrated safety and efficacy.
Liquidity and Going Concern
As of March 31, 2025, the Company had cash and
cash equivalents of $
Pursuant to the requirements of Accounting Standards Codification (ASC) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.
6
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
Under ASC 205-40, the strategic alternatives being pursued by the Company cannot be considered probable at this time because none of the Company’s current plans have been finalized at the time of the issuance of these financial statements and the implementation of any such plan is not probable of being effectively implemented as none of the plans are entirely within the Company’s control. Accordingly, substantial doubt is deemed to exist about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
Reverse Stock Split – Effective
April 15, 2025, China Pharma implemented a
Consolidation and Basis of Presentation – The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in United States dollars. The accompanying unaudited interim condensed consolidated financial statements include the accounts and operations of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation.
Helpson’s functional currency is the Chinese Renminbi. Helpson’s revenue and expenses are translated into United States dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating Helpson’s financial statements are included in accumulated other comprehensive income, which is a component of stockholders’ equity. Gains and losses arising from transactions denominated in a currency other than the functional currency of the entity that is party to the transaction are included in the results of operations.
In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated on consolidation. However, the results of operations included in such financial statements may not necessary be indicative of annual results. Such financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2025 (“2024 Annual Report”).
Accounting Estimates - The methodology used to prepare the Company’s financial statements is in conformity with U.S. GAAP, which requires the management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Therefore, actual results could differ from those estimates.
The Company uses the same accounting policies in preparing its quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
Loss Per Share - Basic loss per share is calculated by dividing loss available to common stockholders by the weighted-average number of shares of common stock outstanding, excluding unvested stock. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common shares, including unvested stock, had been issued and if the additional common shares were dilutive.
The potentially dilutive
common shares related to the option to purchase
7
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
Potentially
dilutive common shares related to the option to purchase
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. The amendments in this ASU are intended to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. For interim and annual reporting periods, an entity shall disaggregate, in a tabular format disclosure in the notes to financial statements, all relevant expense captions presented on the face of the income statement in continuing operations into the purchases of inventory, employee compensation, depreciation, amortization, and depletion. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this Update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements We are currently evaluating the impact the adoption of ASU 2024-03 will have on its consolidated financial statements and related disclosures. We do not expect the adoption of this accounting standard to have an impact on our Consolidated Financial Statements but will require certain additional disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. The ASU provides additional guidance on whether induced conversion or extinguishment accounting should be applied to certain settlements of convertible debt instruments that do not occur in accordance with the instruments’ preexisting terms. The ASU requires entities to apply a preexisting contract approach. To qualify for induced conversion accounting under this approach, the inducement offer is required to preserve the form of consideration and result in an amount of consideration that is no less than that issuable pursuant to the preexisting conversion privileges. ASU 2024-04 clarifies how entities should assess the form and amount of consideration when applying this approach. In addition, the new ASU clarifies that induced conversion accounting can be applied to settlements of certain convertible debt instruments that are not currently convertible as long as the instrument contained a substantive conversion feature as of both its issuance date and the inducement offer acceptance date. The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact the adoption of ASU 2024-03 will have on its combined financial statements and related disclosures.
From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASC are communicated through issuance of ASUs. Unless otherwise discussed, the Company believes that the recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on its consolidated financial statements upon adoption.
From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASC are communicated through issuance of ASUs. Unless otherwise discussed, the Company believes that the recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on its consolidated financial statements upon adoption.
NOTE 2 – ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, consist of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Trade accounts receivable | ||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Trade accounts receivable, net | $ | $ | ||||||
8
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
Our allowance for credit losses estimate practice
using the current expected credit loss method is that we consider accounts receivable balances aged within 180 days current, except for
any individual uncollectible account assessed by management. We account for the following respective percentage as bad debt allowance
based on age of the accounts receivables:
We recognize credit losses per actual write-offs
as well as changes of allowance for credit losses. To the extent that our current allowance for credit losses is higher than that of the
previous period, we recognize a credit loss for the difference during the current period, and when the current credit losses are lower
than that of the previous period, we recognize a gain from the reversal of the allowance for credit losses for the difference. The allowance
for credit losses balances were $
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| At the beginning of the period | ||||||||
| Credit gains | ( | ) | ( | ) | ||||
| Credit loss write-offs | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| At the end of the period | ||||||||
NOTE 3 – INVENTORIES
Inventories consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total Inventories | ||||||||
| Less: Provision for obsolescence | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Changes to the provision for obsolescence consisted of the following:
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| At the beginning of the period | $ | $ | ||||||
| Charges to provision | ||||||||
| Exchange rate | ( | ) | ||||||
| At the end of the period | $ | $ | ||||||
9
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Permit of land use | $ | $ | ||||||
| Building | ||||||||
| Plant, machinery and equipment | ||||||||
| Motor vehicle | ||||||||
| Office equipment | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:
| Asset | Life - years | |
| Permit of land use | ||
| Building | ||
| Plant, machinery and equipment | ||
| Motor vehicle | ||
| Office equipment |
Depreciation relating to office equipment was
included in general and administrative expenses, while all other depreciation was included in cost of revenue. Depreciation expense was
$
NOTE 5 - INTANGIBLE ASSETS
Intangible assets represent the cost of medical formulas approved for production by the NMPA, the intellectual property acquired (“Bonier Agreement”) from Chengdu Bonier Medical Technology Development Co., Ltd. and the invention patents and intellectual property acquired pursuant to Technology Transfer Agreements in 2024 and 2023. No costs were reclassified from advances to intangible assets during the three months ended March 31, 2025 and 2024, respectively.
There were no service fees or profit payments paid related to the Bonier Agreement or the Technology Transfer Agreements from 2024 and 2023 for the three months ended March 31, 2025 and 2024, respectively.
Approved medical formulas are amortized from the
date NMPA approval is obtained over their individually identifiable estimated useful life, which range from ten to thirteen years. It
is at least reasonably possible that a change in the estimated useful lives of the medical formulas could occur in the near term due to
changes in the demand for the drugs and medicines produced from these medical formulas. Amortization expense relating to intangible assets
was $
10
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
Intangible assets consisted of NMPA approved medical formulas, a Utility Model Patent and two Invention Patents as follows:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| NMPA approved medical formulas | $ | $ | ||||||
| Technology from Bonier | ||||||||
| Invention Patents | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Net carrying amount | ||||||||
| Intangible assets in process | ||||||||
| $ | $ | |||||||
NOTE 6 – OTHER PAYABLES
Other Payables consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Compensation payable to officer | $ | $ | ||||||
| Business taxes and other | ||||||||
| Total Other Payables | $ | $ | ||||||
NOTE 7 – RELATED PARTY TRANSACTIONS
The Company had previously received advances from
its Chairperson Li. Total amounts owed were $
NOTE 8 –LINES OF CREDIT
On December 21, 2022 the Company entered into
a new line of credit for an aggregate amount of RMB
11
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
On September 30, 2022 the Company received a line
of credit for RMB
Principal payments required for the remaining terms of the loan facility and lines of credit as of March 31, 2025 are as follows:
| Year | Lines of Credit | |||
| 2025 | ||||
| 2026 | ||||
| $ | ||||
Fair Value of Lines of Credit – Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the carrying amounts of the lines of credit outstanding as of March 31, 2025 and December 31, 2024 approximated their fair values because the underlying instruments bear an interest rate that approximates current market rates.
NOTE 9 - LEASES
The Company has leases for certain office and
production facilities in the PRC which are classified as operating leases. The leases contain payment terms for fixed amounts. Options
to extend are recognized as part of the lease liabilities and recognized as right of use assets when management estimates to renew the
lease. There are no residual value guarantees, no variable lease payments, and no restrictions or covenants imposed by leases. The discount
rate used in measuring the lease liabilities and right of use assets was determined by reviewing the Company’s incremental borrowing
rate at the initial measurement date. For the three months ended March 31, 2025 and 2024,
operating lease cost was $
Minimum lease payments for the Company’s operating lease liabilities were as follows for the twelve month period ended March 31:
| 2025 | $ | |||
| Total undiscounted cash flows | ||||
| Less: Imputed interest | ( | ) | ||
| Less: Lease liabilities, current portion | ( | ) | ||
| Lease liabilities, non current portion | $ |
The Company has leases with terms less than one year for certain provincial sales offices that are not material.
12
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
NOTE 10 – INCOME TAXES
Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect of a change in tax laws or rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Liabilities are established for uncertain tax positions expected to be taken in income tax returns when such positions are judged to meet the “more-likely-than-not” threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of other expenses. Through December 31, 2024, the Company has not identified any uncertain tax positions that it has taken. U.S. income tax returns for the years ended December 31, 2020 through December 31, 2024 and the Chinese income tax return for the year ended December 31, 2024 are open for possible examination.
Under the current tax law in the PRC, the Company is and will be subject
to the enterprise income tax rate of
There was no provision for income taxes for the three months ended March 31, 2025 and 2024, respectively due to continued net losses of the Company.
As of March 31, 2025, Helpson had net operating
loss carryforwards for PRC tax purposes of approximately $
U.S. federal tax legislation, commonly referred
to as the Tax Cuts and Jobs Act (the “U.S. Tax Reform”), was signed into law on December 22, 2017. The U.S. Tax Reform
significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax
rate from
In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
differences become deductible or tax loss carry forwards are utilized. Management considers projected future taxable income
and tax planning strategies in making this assessment. Based upon an assessment of the level of historical taxable income and
projections for future taxable income over the periods on which the deferred tax assets are deductible or can be utilized, management
believes it is not likely for the Company to realize all benefits of the deferred tax assets as of March 31, 2025 and December 31, 2024. Therefore,
the Company provided for a valuation allowance against its deferred tax assets of $
The Company also incurred various other taxes, comprised primarily of business taxes, value-added taxes, urban construction taxes, education surcharges and others. Any unpaid amounts are reflected on the balance sheets as accrued taxes payable.
NOTE 11 – FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, a hierarchy has been established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities; Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data; and Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
13
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
The Company uses fair
value to measure the value of the banker’s acceptance notes it holds at March 31, 2024 and December 31, 2024. The banker’s acceptance
notes are recorded at cost which approximates fair value.
| Fair Value Measurements at | ||||||||||||||||
| Reporting Date Using | ||||||||||||||||
| Description | March 31, 2025 | Level 1 | Level 2 | Level 3 | ||||||||||||
| Banker’s acceptance notes | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurements at | ||||||||||||||||
| Reporting Date Using | ||||||||||||||||
| Description | December 31, 2024 | Level 1 | Level 2 | Level 3 | ||||||||||||
| Banker’s acceptance notes | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
NOTE 12 – STOCKHOLDERS’ EQUITY
China Pharma is authorized to issue
According to relevant PRC laws, companies registered
in the PRC, including China Pharma’s PRC subsidiary, Helpson, are required to allocate at least
Effective April 15, 2025, the Company implemented
a
Effective March 6, 2024, the Company implemented
a
14
CHINA PHARMA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
2010 Incentive Plan
On November 12, 2010, the Company’s Board
adopted the Company’s 2010 Incentive Plan (the “Plan”), which was then approved by stockholders on December 22, 2010.
On October 17, 2019, the Board of Directors approved the First Amendment to the 2010 Incentive Plan (the “Amendment”), pursuant
to which the term of the 2010 Incentive Plan was extended to December 31, 2029. The Amendment was adopted by the stockholders on December
19, 2019. On October 25, 2021, the Board of Directors approved, and on December 27, 2021 our stockholders adopted the Amendment No.2 to
the Plan to increase the number of shares of the Common Stock, that are reserved thereunder by
There were no issuances of securities from the Plan for the three months ended March 31, 2025 and as such, no compensation expense was recognized for the period.
As of March 31, 2025, there was remaining unrecognized compensation expense related to stock options or restricted stock grants.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Current vulnerability due to certain concentrations
For the
three months ended March 31, 2025, no customer accounted for greater than 10.0% of sales and two customers accounted for
For the
three months ended March 31, 2024, no customer accounted for greater than 10.0% of sales and two customers accounted for
Nature of Operations
Economic environment - Substantially all of the Company’s operations are conducted in the PRC, and therefore the Company is subject to special considerations and significant risks not typically associated with companies operating in the United States of America. These risks include, among others, the political, economic and legal environments and fluctuations in the foreign currency exchange rate. The Company’s results from operations may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. The unfavorable changes in global macroeconomic factors may also adversely affect the Company’s operations.
In addition, all of the Company’s revenue is denominated in the PRC’s currency of Renminbi (RMB), which must be converted into other currencies before remittance out of the PRC. Both the conversion of RMB into foreign currencies and the remittance of foreign currencies abroad require approval of the PRC government.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The statements contained in this report with respect to our financial condition, results of operations and business that are not historical facts are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, such as “anticipate,” “believe,” “expect,” “plan,” “intend,” “seek,” “estimate,” “project,” “could,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the readers that any such forward-looking statements contained in this report reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employees, and general business factors affecting our operations, markets, growth, services, products, licenses and other factors, some of which are described in this report and some of which are discussed in our other filings with the Securities and Exchange Commission (the “SEC”). These forward-looking statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing our company, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.
These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. All written and oral forward-looking statements made in connection with this report that are attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by applicable law or regulation.
Business Overview & Recent Developments
China Pharma Holding Inc. (“China Pharma”) is not a Chinese operating company but a Nevada holding company. All of our operations are conducted in the PRC through Hainan Helpson Medical & Biotechnology Co., Ltd (“Helpson”), our wholly owned subsidiary incorporated under the laws of the People’s Republic of China (the “PRC”), where the manufacturing facilities are located. Helpson is principally engaged in the development, manufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases and medical conditions prevalent in the PRC. It manufactures pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions. The majority of its pharmaceutical products are sold on a prescription basis and all of them have been approved for at least one or more therapeutic indications by the National Medical Products Administration (the “NMPA”, formerly China Food and Drug Administration, or CFDA) based upon demonstrated safety and efficacy.
China’s consistency evaluation of generic drugs continues to proceed for the three months ended March 31, 2025. Helpson has always taken the task of promoting the consistency evaluation as a top priority, and worked on them actively. However, for each drug’s consistency evaluation, due to the continuous dynamic changes of the detailed consistency evaluation policies, market trends, expected investments, and expected returns of investment (“ROI”), the whole industry, including Helpson, has been making slow progresses in terms of the consistency evaluation. One of the flagship products, Candesartan tablets, a hypertension product, has passed generic-drug-consistency-evaluation in early August 2023.
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Helpson has taken a more cautious and flexible attitude towards initiating and progressing any project for existing products’ consistency evaluation to cope with the changing macro environment of drug sales in China. In 2018, relevant Chinese authorities decided to implement trial Centralized Procurement (“CP”) activities in 11 selected pilot cities (including 4 municipalities and 7 other cities), since then, nine rounds of CP activities have been carried out as of November 13, 2024, which significantly reduced the price of the drugs that won the bids. In addition, the consistency evaluation has been adopted as one of the qualification standards for participating in the CP activities. As a result, Helpson needs to balance between the market access brought by CP, the investment of financial resources and time to obtain the qualification of CP, and the sharp decline in the price of drugs included in CP before making decisions regarding CP for any products.
In addition, Helpson continues to explore the field of comprehensive healthcare. Comprehensive healthcare is a general concept proposed by the Chinese government according to the development of the times, social needs and changes in disease spectrum. According to the Outline of “Healthy China 2030” issued by Chinese government in October 2016, the total size of China’s health service industry is expected to reach RMB 16 trillion (approximately $2.5 trillion) by 2030. This industry focuses on people’s daily life, aging and diseases, pays attention to all kinds of risk factors and misunderstandings affecting health, calls for self-health management, and advocates the comprehensive care throughout the entire process of life. It covers all kinds of health-related information, products, and services, as well as actions taken by various organizations to meet the health needs. In response to this trend, Helpson launched Noni enzyme, a natural, Xeronine-rich antioxidant food supplement at the end of 2018. It also launched wash-free sanitizers and masks, in 2020, to address the market needs caused by COVID-19 in China. As Chinese government officially terminated its zero-case policy, now the responsibility to protect people from the impact of COVID-19 falls more to the citizens themselves, and masks and sanitizers have been popular since COVID-19. Helpson has sufficient production capacity for medical masks, surgical masks, KN95 masks, and N95 masks, which also meets the personal needs for protection against other respiratory infectious diseases. Helpson’s N95 medical protective mask has received registration certificate at the end of 2022 and has been on the market in the mainland China nationwide.
Helpson will continue to optimize its product structure and actively respond to the current health needs of human beings.
Results of Operations for the Three Months ended March 31, 2025
Revenue
Revenue was $1.14 million for the three months ended March 31, 2025, which represented a decrease of $0.23 million, as compared to $1.37 million for the three months ended March 31, 2024. This decline was mainly due to an increasing number of drugs from other medicine providers being included in national CP, while Helpson’s peer products have not passed consistency evaluation. As a result, they are not qualified to participate in CP, the resulting sales has decreased.
Set forth below are our revenues by product category in millions (USD) for the three months ended March 31, 2025 and 2024:
| Three Months Ended March 31, | ||||||||||||||||
| Product Category | 2025 | 2024 | Net Change | % Change | ||||||||||||
| CNS Cerebral & Cardio Vascular | 0.34 | 0.32 | 0.02 | 6 | % | |||||||||||
| Anti-Viral/ Infection & Respiratory | 0.72 | 0.93 | -0.21 | -23 | % | |||||||||||
| Digestive Diseases | 0.06 | 0.04 | 0.02 | 50 | % | |||||||||||
| Other | 0.02 | 0.08 | -0.06 | -75 | % | |||||||||||
The most significant revenue decrease in terms of dollar amount was in the “Anti-Viral/ Infection & Respiratory” category. It generated $0.72million for the three months ended March 31, 2025, compared to $0.93 million for the three months ended March 31, 2024, which represented a decrease of $0.21million. This decrease was mainly due to the decrease in sales of the Roxithromycin Dispersible Tablet due to market fluctuation.
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The “Other” product category generated $0.02 million for the three months ended March 31, 2025, compared to $0.08 million for the three months ended March 31, 2024, which represented a decrease of $0.06 million. This decrease was mainly due to the decrease in sales of the Vitamin B6 for Injection due to market fluctuation.
Our “CNS Cerebral & Cardio Vascular” product category generated $0.34 million in sales revenue for the three months ended March 31, 2025, compared to $0.32 million for the same period last year, which represented an increase of $0.02million. This increase was mainly due to the increase in sales of Alginic Sodium Diester Injection due to market fluctuation.
“Digestive” product category generated $0.06million in sales revenue for the three months ended March 31, 2025, compared to $0.04million for the same period last year, which represented an increase of $0.02 million. This increase was mainly due to the increase in sales of Omeprazole due to market volatility.
| Three Months Ended March 31, | ||||||||
| Product Category | 2025 | 2024 | ||||||
| CNS Cerebral & Cardio Vascular | 29.9 | % | 23.9 | % | ||||
| Anti-Viral/ Infection & Respiratory | 63.4 | % | 54.4 | % | ||||
| Digestive Diseases | 5.0 | % | 14.6 | % | ||||
| Other | 1.7 | % | 7.1 | % | ||||
For the three months ended March 31, 2025, revenue breakdown by product category experienced certain variances compared with that of the prior year. Sales in the “Anti-Viral/Infection & Respiratory” product category represented 63.4% and 54.4% of total sales in the three months ended March 31, 2025 and 2024, respectively. The “CNS Cerebral & Cardio Vascular” category represented 29.9% of total revenue for the three months ended March 31, 2025, compared to23.9% for the three months ended March 31, 2024. The “Digestive Diseases” category represented 5.0% and 14.6% of total revenue for the three months ended March 31, 2025 and 2024, respectively. The “Other” category represented1.7% and 7.1% of revenues for the three months ended March 31, 2025 and 2024, respectively.
Cost of Revenue
For the three months ended March 31, 2025, our cost of revenue was $1.27 million, or 112.0% of total revenue, which represented a decrease of $0.39 million from $1.66 million, or 121.2% of total revenue, in the same period of 2024. The decrease in cost of revenues in the twelve months ended December 31, 2024 was mainly due to the decrease in revenue.
Gross Loss and Loss Margin
Gross loss for the three months ended March 31, 2025 was $0.14 million, compared to $0.29million for the three months ended March 31, 2024. Our gross loss margin for the three months ended March 31, 2025 was 12.0%, compared to 21.2% for the three months ended March 31, 2024.The main reasons for the decrease in the gross loss rate were: some of our machinery and equipment have reached their accounting useful life and all the depreciation has been accrued. As a result, the product cost has decreased.
Selling Expenses
Our selling expenses for the three months ended March 31, 2025 were $0.09million, a decrease of $0.02million compared to $0.11million for the three months ended March 31, 2024. Selling expenses accounted for 7.7% of the total revenue for the three months ended March 31, 2025 compared to 7.9% for the three months ended March 31, 2024. Because of the adjustments in the sales practices and Chinese national CP, we reduced selling expenses to efficiently support the sales and the collection of accounts receivable, especially in the context of the increasing impact of CP, like other players in the industry, we have reduced the promotion expenses.
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General and Administrative Expenses
Our general and administrative expenses for the three months ended March 31, 2025were $0.51 million, an increase of $0.02 million compared to $0.49 million for the three months ended March 31, 2024. General and administrative expenses accounted for 44.6% and 35.7% of our total revenues for the three months ended March 31, 2025 and 2024, respectively. Reason for this increase was mainly due to the increased amortization of intangible asset.
Research and Development Expenses
Our research and development expenses were $0.03 million for the three months ended March 31, 2025 and 2024, respectively. Research and development expenses accounted for 2.6% and2.3% of our total revenues for the three months ended March 31, 2025 and 2024, respectively. These expenditures were mainly spent on the consistency evaluation of the existing products.
Credit Gains
Our credit gains for the three months ended March 31, 2025 was $1,323, as compared to $2,066 for the same period in 2024.
In general, our normal customer credit or payment terms are 90 days. This has not changed in recent years. Such relatively long credit term is due to the peculiar environment affecting the Chinese pharmaceutical market, as deferred payments by state-owned hospitals to local drug distributors are common, and their deferred payments will indirectly delay the payments from our customers to us. Due to the timeliness requirements of the NMPA for logistics of drug sales, Helpson, like most other pharmaceutical companies in China, sells substantially all the drugs to local drug distributors, certified by GSP (Good Supply Practice), the standard of products supply, which is a standard protocol to control the quality of the products during circulation. These GSP certified distributors then sell the drugs to state-owned hospitals. The GSP certified distributors’ payments to us are usually delayed as they will pay us after they receive payment from the state-owned hospitals. Therefore, as most of our customers are GSP certified distributors, we adopt a unified policy for bad debt allowance reserves for GMP’s customers who are typically GSP certified distributors. As is typical in the Chinese pharmaceutical market, there are no written contracts between the Company and any of its GSP certified distributors requesting the distributors to pay the Company’s account receivable upon their receipt of funds from the distributors’ customers, or state-owned hospitals. Nevertheless, the Company’s customers typically process the payment of the account receivable to the Company upon their receipt of payment from their customers, i.e., the state-owned hospitals, as a matter of implied consensus or industry standard. In the event the length of collection term is deviated from any of the past pattern of any particular customer, the Company will adjust its credit term.
The amount of net accounts receivable that was past due (or the amount of accounts receivable that was more than 180 days old) was $0.07 million and $0.06 million as of March 31, 2025 and December 31, 2024, respectively.
The following table illustrates our trade accounts receivable aging distribution in terms of the percentage of the total accounts receivable, respective gross accounts receivables as well as the allocated allowance for credit losses as of March31, 2025and 2024:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| 1 - 180 Days | 1.84 | % | 1.24 | % | ||||
| 180 - 365 Days | 0.57 | % | 0.48 | % | ||||
| 365 - 720 Days | 0.01 | % | 0.01 | % | ||||
| > 720 Days | 97.58 | % | 98.27 | % | ||||
| Total | 100.00 | % | 100.00 | % | ||||
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| Gross Trade Accounts Receivable Amount | Allocated Allowance for Doubtful Accounts | |||||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 2025 | December 31, 2024 | |||||||||||||
| 1-180 Days | 256,441.93 | 176,430.91 | - | |||||||||||||
| 180-365 Days | 80,065.58 | 68,321.92 | 8,006.56 | 6,832.19 | ||||||||||||
| 365-720 Days | 1,334.01 | 718.49 | 933.81 | 502.94 | ||||||||||||
| Over 720 Days | 13,596,216.53 | 13,930,801.32 | 13,596,216.53 | 13,930,801.32 | ||||||||||||
| Total | 13,934,058.05 | 14,176,272.64 | 13,605,156.90 | 13,938,136.45 | ||||||||||||
Our allowance for credit losses estimate practice using the current expected credit loss method considers accounts receivable balances aged within 180 days current, except for any individual uncollectible account assessed by management. We account for the following respective percentage as credit loss allowance based on age of the accounts receivables: 10% of accounts receivable that are between 180 days and 365 days old, 70% of accounts receivable that are between 365 days and 720 days old, and 100% of accounts receivable that are greater than 720 days old.
Our allowance for credit losses as a percentage of accounts receivable of trade accounts receivable was 97.6% and 98.3% as of March31, 2025 and December 31, 2024, respectively.
We conduct analysis and review on accounts receivables for customers on a specific, per-customer basis in the fourth fiscal quarter of each fiscal year. For customers (i) whose business license has been cancelled or expired; (ii) whose key business certificates such as GSP (Good Supply Practice) license have been invalid or revoked; (iii) who have no ability to continue operations, or (iv) who are encountering other issues that lead to accounts receivable unrecoverable, the receivable will be written-off as per the resolution of our Board of Directors.
We recognize credit losses per actual write-offs as well as changes of allowance for credit losses. To the extent that our current allowance for credit losses is higher than that of the previous period, we recognize a bad debt expense for the difference during the current period, and when the current allowance is lower than that of the previous period, we recognize a credit gains for the difference. The allowance for credit losses balances were $13.6million as of March 31, 2025 and $13.9million as of December 31, 2024, respectively. The changes in the allowances for credit losses of trade accounts receivable during the three months ended March 31, 2025 and 2024 were as follows:
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance, Beginning of Period | $ | 13,587,182 | $ | 13,786,074 | ||||
| Bad debt expense | (1,323 | ) | (2,066 | ) | ||||
| Foreign currency translation adjustment | 19,298 | (24,015 | ) | |||||
| Balance, End of Period | $ | 13,605,157 | $ | 13,759,993 | ||||
Our credit gains for the three months ended March 31, 2025 was $1,323, as compared to$2,066 in the same period in 2024.
Loss from Operations
Our operating loss for the three months ended March 31, 2025 was $0.76 million, compared to $0.92 million in the same period in 2024.
Net Interest Expense
Net interest expense was $0.03million for the three months ended March 31, 2025 and $0.04million for the three months ended March 31, 2024.
20
Net Loss
Net loss for the three months ended March 31, 2025 was $0.79 million, compared to net loss of $0.96 million for the three months ended March 31, 2024. The decrease in net loss was mainly a result of the decline in cost.
Loss per basic and diluted common share was $0.24 for the three months ended March 31, 2025 and $0.72 for the three months ended March 31, 2024, respectively.
The number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 3,261,911 for the three months ended March 31, 2025, as compared to 1,333,059 for the same period in 2024.
The significant change in weighted-average outstanding shares and per share figures reflects the impact of our 1-for-10 reverse stock split that became effective on April 15, 2025. While this split occurred after the quarter end, in accordance with SEC reporting requirements and U.S. GAAP, we have retrospectively adjusted all share and per share information for all periods presented. The reverse stock split reduced the number of outstanding shares by combining every 10 shares into 1 share, which has the mathematical effect of increasing the loss per share figures proportionately when comparing current results to prior periods. This stock split follows our previous 1-for-5 reverse stock split implemented on March 6, 2024.
Liquidity and Capital Resources
Our principal source of liquidity is cash generated from operations and bank lines of credit. Currently the Company has not witnessed or expected to encounter any difficulties to refinance those lines of credit this year. As of March 31, 2025, the aggregated advance from our CEO was $1.15 million for use in operations. Our cash and cash equivalents were $0.41million, representing 2.9% of our total assets, as of March 31, 2025, as compared to $0.63 million, representing 4.2% of our total assets as of March 31, 2024. All of the $0.41million of cash and cash equivalents as of March 31, 2025are considered to be reinvested indefinitely in the Company’s Chinese subsidiary, Helpson and are not expected to be available for payment of dividends or for other payments to its parent company or to its shareholders.
The Company obtained various lines of credit in details described under Note 8 to its audited consolidated financial statements contained in this report which is incorporated by reference herein.
China Pharma issued a convertible note to an institutional accredited investor as disclosed in Note 9 to the audited consolidated financial statements contained in this report which is incorporated by reference herein.
Although the Company obtained additional lines of credit for the three months ended March 31, 2025, there can be no assurance that the Company will be able to achieve its future strategic goals, including the launch of new products. This raises substantial doubt about the Company’s ability to continue as a going concern. Although our Chairperson and Chief Executive Officer had advanced funds for working capital for the three months ended March 31, 2025, there can be no assurances that this will continue in the future. We may seek additional debt or equity financing as necessary when we believe the market conditions are the most advantageous to us and/or require us to reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives. There can be no assurance that any additional financing will be available on acceptable terms, if at all.
21
Operating Activities
Net cash used in operating activities was $0.06 million in the three months ended March 31, 2025, compared to $0.59million in the same period in 2024.
As of March 31, 2025, our net trade accounts receivable was $0.33 million, an increase of $0.10million from $0.23million as of December 31, 2024.
As of March 31, 2025, total inventory was $1.98 million, compared to $2.27 million as of December 31, 2024.
Investing Activities
During the three months ended March 31, 2025, net cash used in investing activities was $0.08million. This was mainly due to the investment in purchasing of equipment, and the development of a medicine formula. And there was no investing activities for the three months ended March 31, 2024.
Financing Activities
Cash flow used by financing activities was $70,033 in the three months ended March 31, 2025; compared to $6,856 provided for the same period for the three months ended March 31, 2024.
According to relevant PRC laws, companies registered in the PRC, including our PRC subsidiary, Helpson, are required to allocate at least ten percent (10%) of their after-tax net income, as determined under the accounting standards and regulations in the PRC, to statutory surplus reserve accounts until the reserve account balances reach fifty percent (50%) of the companies’ registered capital prior to their remittance of funds out of the PRC. Allocations to these reserves and funds can only be used for specific purposes and are not transferrable to the parent company in the form of loans, advances or cash dividends. As of March 31, 2025 and December 31, 2024, Helpson’s net assets totaled ($6,785,000)and ($6,197,000), respectively. Due to the restriction on dividend distribution to overseas shareholders, the amount of Helpson’s net assets that was designated for general and statutory capital reserves, and thus could not be transferred to our parent company as cash dividends, was 50% of Helpson’s registered capital, which was both $8,145,000 as of March 31, 2025 and December 31, 2024, respectively. The amount that Helpson must set aside for the statutory surplus fund accounts exceeds its total net assets at March 31, 2025 and December 31, 2024. There were no allocations to the statutory surplus reserve accounts during the three months ended March 31, 2025.
The Chinese government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of China. Our businesses and assets are primarily denominated in RMB. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires the submission of a payment application form together with certain invoices and executed contracts. The currency exchange control procedures imposed by Chinese government authorities may restrict Helpson, our Chinese subsidiary, from transferring its net assets to our parent company through loans, advances or cash dividends.
Off-Balance Sheet Arrangements
As of March 31, 2025, we did not have any off-balance sheet arrangements.
Critical Accounting Policies
Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. The discussion of our critical accounting policies contained in Note 1 to our consolidated financial statements, “Organization and Significant Accounting Policies”, included in the Company’s annual report on Form 10-Q for the three months ended March 31, 2025, which is incorporated herein by reference.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and interim Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this quarterly report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (b) is accumulated and communicated to management, including our Chief Executive Officer and interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above. Based on this evaluation, our Chief Executive Officer and interim Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2025 to satisfy the objectives for which they are intended. This was due to the material weakness in our internal control over financial reporting, with respect to our lack of accounting financial reporting personnel who were knowledgeable in U.S. GAAP, as disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 31, 2025. Notwithstanding the aforementioned material weakness, management has concluded that our condensed consolidated financial statements included in this report are fairly stated in all material respects in accordance with U.S. GAAP for each period presented herein.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 6. Exhibits
The exhibits required by this item are set forth in the Exhibit Index attached hereto.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CHINA PHARMA HOLDINGS, INC. | |||
| Date: May 14, 2025 | By: | /s/ Zhilin Li | |
| Name: | Zhilin Li | ||
| Title: | President and Chief Executive Officer | ||
| (principal executive officer) | |||
| Date: May 14, 2025 | By: | /s/ Zhilin Li | |
| Name: | Zhilin Li | ||
| Title: | Interim Chief Financial Officer | ||
| (principal financial officer and principal accounting officer) | |||
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EXHIBIT INDEX
| No. | Description | |
| 3.1 | The Third Amended and Restated Articles of Incorporation of the Company. | |
| 31.1 - | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 - | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 - | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS - | XBRL Instance Document | |
| 101.SCH - | XBRL Taxonomy Extension Schema Document | |
| 101.CAL - | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF - | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB - | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE - | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 - | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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