x
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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Nevada
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73-1564807
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(State or other jurisdiction of
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(IRS Employer Identification No.)
|
incorporation or organization)
|
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company x
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PART I FINANCIAL INFORMATION | Page |
Item 1.
|
Financial Statements
|
2 |
Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013 (Unaudited)
|
3 | |
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months
Ended September 30, 2014 and 2013 (Unaudited)
|
4 | |
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)
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5 | |
Notes to Condensed Consolidated Financial Statements (Unaudited)
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6 | |
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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14
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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23 |
Item 4.
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Controls and Procedures
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23 |
PART II OTHER INFORMATION
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||
Item 6.
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Exhibits
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24 |
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
(Unaudited)
|
||||||||
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 4,269,037 | $ | 5,993,139 | ||||
Banker's acceptances
|
116,047 | 336,003 | ||||||
Trade accounts receivable, less allowance for doubtful
|
||||||||
accounts of $27,912,179 and $13,301,622, respectively
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30,642,878 | 45,147,602 | ||||||
Other receivables, less allowance for doubtful
|
||||||||
accounts of $70,004 and $43,064, respectively
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516,095 | 175,739 | ||||||
Advances to suppliers
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9,040,464 | 7,626,716 | ||||||
Inventory, less allowance for obsolescence
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||||||||
of $4,670,853 and $8,027,126, respectively
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19,014,172 | 24,677,120 | ||||||
Total Current Assets
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63,598,693 | 83,956,319 | ||||||
Advances for purchases of intangible assets
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41,653,862 | 41,701,505 | ||||||
Property and equipment, net of accumulated depreciation of
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||||||||
$5,951,165 and $5,264,350, respectively
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33,869,491 | 30,241,337 | ||||||
Intangible assets, net of accumulated amortization of
|
||||||||
$4,075,696 and $3,812,992, respectively
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1,410,482 | 1,711,793 | ||||||
TOTAL ASSETS
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$ | 140,532,528 | $ | 157,610,954 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Trade accounts payable
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$ | 3,131,988 | $ | 1,877,437 | ||||
Accrued expenses
|
214,740 | 323,651 | ||||||
Other payables
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1,293,273 | 1,312,361 | ||||||
Advances from customers
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1,773,478 | 2,228,238 | ||||||
Other payables - related parties
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1,354,567 | 1,354,567 | ||||||
Current portion of construction loan facility
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1,625,118 | - | ||||||
Short-term notes payable
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4,875,353 | 4,909,662 | ||||||
Total Current Liabilities
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14,268,517 | 12,005,916 | ||||||
Non-current Liabilities:
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||||||||
Construction loan facility
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11,375,825 | 12,484,183 | ||||||
Long-term deferred tax liability
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232,866 | 176,414 | ||||||
Total Liabilities
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25,877,208 | 24,666,513 | ||||||
Stockholders' Equity:
|
||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized;
|
||||||||
no shares issued or outstanding
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- | - | ||||||
Common stock, $0.001 par value; 95,000,000 shares authorized;
|
||||||||
43,579,557 shares and 43,579,557 shares outstanding, respectively
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43,580 | 43,580 | ||||||
Additional paid-in capital
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23,590,204 | 23,590,204 | ||||||
Retained earnings
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71,535,109 | 88,896,276 | ||||||
Accumulated other comprehensive income
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19,486,427 | 20,414,381 | ||||||
Total Stockholders' Equity
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114,655,320 | 132,944,441 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 140,532,528 | $ | 157,610,954 |
CHINA PHARMA HOLDINGS, INC.
|
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
AND COMPREHENSIVE INCOME (LOSS)
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||||||||||||||||
(Unaudited)
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||||||||||||||||
For the Three Months
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For the Nine Months
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|||||||||||||||
Ended September 30,
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Ended September 30,
|
|||||||||||||||
2014
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2013
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2014
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2013
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|||||||||||||
Revenue
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$ | 5,566,543 | $ | 8,116,599 | $ | 18,802,602 | $ | 24,392,311 | ||||||||
Cost of revenue
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4,057,480 | 5,863,587 | 12,215,756 | 17,837,989 | ||||||||||||
Inventory obsolescence
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- | 15,747 | - | 3,735,820 | ||||||||||||
Gross profit
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1,509,063 | 2,237,265 | 6,586,846 | 2,818,502 | ||||||||||||
Operating expenses:
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||||||||||||||||
Selling expenses
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745,976 | 921,851 | 2,193,823 | 2,435,592 | ||||||||||||
General and administrative expenses
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422,729 | 372,568 | 1,229,488 | 1,536,831 | ||||||||||||
Research and development expenses
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181,796 | 352,599 | 2,528,230 | 1,384,263 | ||||||||||||
Bad debt expense
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3,940,144 | 3,277,780 | 15,280,588 | 7,910,583 | ||||||||||||
Losses from natural disaster
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2,275,593 | - | 2,275,593 | - | ||||||||||||
Total operating expenses
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7,566,238 | 4,924,798 | 23,507,722 | 13,267,269 | ||||||||||||
Subsidy income
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65,086 | - | 65,086 | - | ||||||||||||
Loss from operations
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(5,992,089 | ) | (2,687,533 | ) | (16,855,790 | ) | (10,448,767 | ) | ||||||||
Other income (expense):
|
||||||||||||||||
Interest income
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8,824 | 2,228 | 47,435 | 4,830 | ||||||||||||
Interest expense
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(325,244 | ) | (89,238 | ) | (495,054 | ) | (263,732 | ) | ||||||||
Net other expense
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(316,420 | ) | (87,010 | ) | (447,619 | ) | (258,902 | ) | ||||||||
Loss before income taxes
|
(6,308,509 | ) | (2,774,543 | ) | (17,303,409 | ) | (10,707,669 | ) | ||||||||
Income tax benefit (expense)
|
(19,215 | ) | 472,512 | (57,758 | ) | 1,129,506 | ||||||||||
Net loss
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(6,327,724 | ) | (2,302,031 | ) | (17,361,167 | ) | (9,578,163 | ) | ||||||||
Other comprehensive income - foreign currency
|
||||||||||||||||
translation adjustment
|
33,366 | 880,315 | (927,954 | ) | 3,918,978 | |||||||||||
Comprehensive (loss) income
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$ | (6,294,358 | ) | $ | (1,421,716 | ) | $ | (18,289,121 | ) | $ | (5,659,185 | ) | ||||
Loss per share:
|
||||||||||||||||
Basic
|
$ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) | ||||
Diluted
|
$ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) |
CHINA PHARMA HOLDINGS, INC.
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(Unaudited)
|
||||||||
For the Nine Months
|
||||||||
Ended September 30,
|
||||||||
2014
|
2013
|
|||||||
Cash Flows from Operating Activities:
|
||||||||
Net loss
|
$ | (17,361,167 | ) | $ | (9,578,163 | ) | ||
Depreciation and amortization
|
1,014,221 | 1,039,716 | ||||||
Bad debt expense
|
15,280,588 | 7,910,583 | ||||||
Deferred income taxes
|
57,758 | (1,129,506 | ) | |||||
Inventory obsolescence reserve
|
- | 3,311,926 | ||||||
Changes in assets and liabilities:
|
||||||||
Trade accounts receivable
|
(3,029,386 | ) | 1,077,182 | |||||
Other receivables
|
(342,012 | ) | (452,500 | ) | ||||
Advances to suppliers
|
(1,468,882 | ) | (642,850 | ) | ||||
Inventory
|
7,671,072 | 4,138,431 | ||||||
Trade accounts payable
|
1,338,724 | 376,312 | ||||||
Accrued taxes payable
|
(34,638 | ) | (2,486,073 | ) | ||||
Other payables and accrued expenses
|
(90,108 | ) | 42,847 | |||||
Advances from customers
|
(439,740 | ) | 90,159 | |||||
Net Cash Provided by Operating Activities
|
2,596,430 | 3,698,064 | ||||||
Cash Flows from Investing Activities:
|
||||||||
Advances for purchases of intangible assets
|
(244,073 | ) | (496,634 | ) | ||||
Purchases of property and equipment and
|
||||||||
construction in process
|
(4,638,265 | ) | (9,267,088 | ) | ||||
Net Cash Used in Investing Activities
|
(4,882,338 | ) | (9,763,722 | ) | ||||
Cash Flows from Financing Activities:
|
||||||||
Proceeds from construction term loan
|
604,756 | 6,437,906 | ||||||
Net Cash Provided by Financing Activity
|
604,756 | 6,437,906 | ||||||
Effect of Exchange Rate Changes on Cash
|
(42,950 | ) | 103,542 | |||||
Net (Decrease) Increase in Cash and Cash Equivalents
|
(1,724,102 | ) | 475,790 | |||||
Cash and Cash Equivalents at Beginning of Period
|
5,993,139 | 4,029,708 | ||||||
Cash and Cash Equivalents at End of Period
|
$ | 4,269,037 | $ | 4,505,498 | ||||
Supplemental Cash Flow Information:
|
||||||||
Cash paid for interest
|
$ | 943,251 | $ | 324,117 | ||||
Cash paid for income taxes
|
- | 2,472,099 | ||||||
Supplemental Noncash Investing and Financing Activities:
|
||||||||
Accounts payable for purchases of property and equipment
|
$ | 69,378 | $ | 136,742 | ||||
Accounts receivable collected with banker's acceptances
|
1,955,808 | 6,256,327 | ||||||
Inventory purchased with banker's acceptances
|
2,173,689 | 2,810,462 | ||||||
Advances for purchases of equipment paid with banker's acceptances
|
- | 2,555,419 | ||||||
Advances for purchases of intangibles paid with banker's acceptances
|
- | 715,445 |
For the Three Months
|
For the Nine Months
|
|||||||||||||||
Ended September 30,
|
Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Net loss
|
$ | (6,327,724 | ) | $ | (2,302,031 | ) | $ | (17,361,167 | ) | $ | (9,578,163 | ) | ||||
Basic weighted-average common shares outstanding
|
43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | ||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Warrants
|
- | - | - | - | ||||||||||||
Options
|
- | - | - | - | ||||||||||||
Diluted weighted-average common shares outstanding
|
43,579,557 | 43,579,557 | 43,579,557 | 43,579,557 | ||||||||||||
Basic loss per share
|
$ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) | ||||
Diluted loss per share
|
$ | (0.15 | ) | $ | (0.05 | ) | $ | (0.40 | ) | $ | (0.22 | ) |
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Raw materials
|
$ | 19,571,419 | $ | 28,259,707 | ||||
Work in process
|
- | 853,602 | ||||||
Finished goods
|
4,113,606 | 3,590,937 | ||||||
23,685,025 | 32,704,246 | |||||||
Obsolescence reserve
|
(4,670,853 | ) | (8,027,126 | ) | ||||
Total Inventory
|
$ | 19,014,172 | $ | 24,677,120 |
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Permit of land use
|
$ | 457,743 | $ | 460,964 | ||||
Building
|
10,033,988 | 2,494,623 | ||||||
Plant, machinery and equipment
|
16,393,856 | 6,671,620 | ||||||
Motor vehicle
|
150,611 | 151,670 | ||||||
Office equipment
|
246,553 | 229,210 | ||||||
Construction in progress
|
12,537,905 | 25,497,600 | ||||||
Total
|
39,820,656 | 35,505,687 | ||||||
Less: accumulated depreciation
|
(5,951,165 | ) | (5,264,350 | ) | ||||
Property and Equipment, net
|
$ | 33,869,491 | $ | 30,241,337 |
For the Three Months
|
For the Nine Months
|
|||||||||||||||
Ended September 30,
|
Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Total interest cost incurred
|
$ | 330,995 | $ | 89,238 | $ | 952,836 | $ | 263,732 | ||||||||
Interest cost capitalized
|
5,751 | - | 457,782 | - | ||||||||||||
Interest expense
|
$ | 325,244 | $ | 89,238 | $ | 495,054 | $ | 263,732 |
Asset
|
Life - years
|
|
Permit of land use
|
40 - 70
|
|
Building
|
20 - 49
|
|
Plant, machinery and equipment
|
10
|
|
Motor vehicle
|
5 - 10
|
|
Office equipment
|
3-5
|
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Gross carrying amount
|
$ | 5,486,178 | $ | 5,524,785 | ||||
Accumulated amortization
|
(4,075,696 | ) | (3,812,992 | ) | ||||
Net carrying amount
|
$ | 1,410,482 | $ | 1,711,793 |
Enterprise Income
|
||
Year
|
Tax Rate | |
2014
|
15%
|
|
2015
|
15%
|
|
2016
|
15%
|
|
Thereafter
|
25%
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Current
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Deferred
|
19,215 | (472,512 | ) | 57,758 | (1,129,506 | ) | ||||||||||
Total income tax expense (benefit)
|
$ | 19,215 | $ | (472,512 | ) | $ | 57,758 | $ | (1,129,506 | ) |
Fair Value Measurements at
|
||||||||||||||||
Reporting Date Using
|
||||||||||||||||
Description
|
September 30, 2014
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Banker's acceptance notes
|
$ | 116,047 | $ | - | $ | 116,047 | $ | - | ||||||||
Total
|
$ | 116,047 | $ | - | $ | 116,047 | $ | - | ||||||||
Fair Value Measurements at
|
||||||||||||||||
Reporting Date Using
|
||||||||||||||||
Description
|
December 31, 2013
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Banker's acceptance notes
|
$ | 336,003 | $ | - | $ | 336,003 | $ | - | ||||||||
Total
|
$ | 336,003 | $ | - | $ | 336,003 | $ | - |
Product Category
|
Three Months Ended September 30,
|
Net Change
|
% Change
|
|
2014
|
2013
|
|||
Anti-Viro/ Infection & Respiratory
|
$3.61
|
$4.20
|
-$0.59
|
-14%
|
CNS Cerebral & Cardio Vascular
|
$1.17
|
$1.80
|
-$0.63
|
-35%
|
Digestive Diseases
|
$0.29
|
$0.80
|
-$0.51
|
-64%
|
Other
|
$0.50
|
$1.30
|
-$0.80
|
-62%
|
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
1 - 90 Days
|
8 | % | 8.0 | % | ||||
90 - 180 Days
|
4.6 | % | 7.4 | % | ||||
180 - 360 Days
|
5.8 | % | 23.3 | % | ||||
360 - 720 Days
|
38.4 | % | 61.3 | % | ||||
> 720 Days
|
43.2 | % | 0.0 | % | ||||
Total
|
100.0 | % | 100.0 | % |
Product Category
|
Nine Months Ended September 30,
|
Net Change
|
% Change
|
|
2014
|
2013
|
|||
Anti-Viro/ Infection & Respiratory
|
$12.70
|
$12.90
|
($0.20)
|
-2%
|
CNS Cerebral & Cardio Vascular
|
$3.07
|
$5.90
|
($2.83)
|
-48%
|
Digestive Diseases
|
$1.06
|
$2.60
|
($1.54)
|
-59%
|
Other
|
$1.92
|
$2.90
|
($0.98)
|
-34%
|
For the Nine Months Ended
|
||||||||
September 30,
|
||||||||
2014
|
2013
|
|||||||
Balance, beginning of period
|
$ | 13,301,622 | $ | 4,429,945 | ||||
Bad debt expense (benefit)
|
15,280,588 | 7,910,583 | ||||||
Charged to reserve – collection discount
|
(531,382 | ) | - | |||||
Foreign currency translation adjustment
|
(138,649 | ) | 7,206 | |||||
Balance, end of period
|
$ | 27,912,179 | $ | 4,268,356 |
Date: November 14, 2014
|
CHINA PHARMA HOLDINGS, INC.
By: /s/ Zhilin Li
Name: Zhilin Li
Title: President and Chief Executive Officer
(principal executive officer)
|
Date: November 14, 2014
|
By: /s/ Zhilin Li
Name: Zhilin Li
Title: Interim Chief Financial Officer
(principal financial officer and principal
accounting officer)
|
1.
|
I have reviewed this report on Form 10-Q of China Pharma Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
|
Exhibit 31.2
|
1.
|
I have reviewed this report on Form 10-Q of China Pharma Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
|
Revolving line of credit (Details) (USD $)
|
Sep. 30, 2014
|
Dec. 31, 2013
|
Nov. 01, 2013
|
---|---|---|---|
Revolving line of credit | |||
Revolving line of credit with a bank | $ 30,000,000 | ||
Annual interest rate | 6.60% | ||
Outstanding balance due under revolving line of credit (RMB 30,000,000) | $ 4,875,353 | $ 4,909,662 |
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