China Pharma Holdings, Inc. Reports Third Quarter 2020 Financial Results

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Nov 13, 2020, 16:10 ET

HAIKOU, China, Nov. 13, 2020 /PRNewswire/ -- China Pharma Holdings, Inc. (NYSE American: CPHI) ("China Pharma," the "Company" or "We"), an NYSE American-listed corporation with a fully-integrated specialty pharmaceuticals subsidiary based in China, today announced financial results for the quarter ended September 30, 2020.

Third Quarter Highlights

Revenue was $2.4 million in the third quarter of 2020, which stayed the same as the condition in the same period of 2019;
Gross margin was 2.0% in the third quarter of 2020, compared to 15.7% in the same period of 2019;
Loss from operations was $1.0 million in the third quarter of 2020 compared to $0.6 million in the same period of 2019;
Net loss was $1.0 million in the third quarter of 2020 compared to $0.7 million in the same period of 2019. Loss per common stock was both $0.02 per basic and diluted share in the third quarter 2020 and 2019, respectively.

Ms. Zhilin Li, China Pharma's Chairwoman and CEO, commented, "Since the outbreak of COVID-19 early this year, it has continued to create a substantial negative impact on sales of pharmaceutical companies, including ours. Nevertheless, we achieved comparable drug sales revenue in the third quarter of 2020 compared to the same period last year, which showed certain improvements from the sales performance in the previous quarter (the second quarter of 2020), thanks to the efforts of the management and sales teams." Ms. Li continued, "We will continue to work on improving human health and we aim to leverage our expertise in the PRC for the development, manufacture and commercialization of pharmaceutical and comprehensive healthcare products for the benefit of human health."

Third Quarter Results

Revenue was both $2.4 million in the three months ended September 30, 2020 and 2019, respectively.

For the three months ended September 30, 2020, our cost of revenue was $2.4 million, or 98% of total revenue, comparing to $2.0 million, or 84% of total revenue, for the same period in 2019. The increase in cost of revenue was mainly due to declining production in the third quarter in addition to constant fixed costs leading to higher costs per unit of products and therefore higher sales costs of revenue in the third quarter of 2020.

Gross profit for the three months ended September 30, 2020 was $0.05 million, as compared to $0.37 million during the same period in 2019. Our gross profit margin in the three months ended September 30, 2020 was 2.0% as compared to 15.7% during the same period in 2019. The decrease in our gross profit margin was mainly due to the increased cost of revenue in the third quarter of 2020.

Our selling expenses for the three months ended September 30, 2020 and 2019 were $0.7 million and $0.6 million, respectively. Selling expenses accounted for 27.2% of the total revenue in the three months ended September 30, 2020, as compared to 25.8% during the same period in 2019. Because of the adjustments in our sales practices and the reformation of healthcare policies, we reduced the number of personnel and expenses to efficiently support our sales and the collection of accounts receivable.

Our general and administrative expenses were both $0.3 million for the three months ended September 30, 2020 and 2019, respectively. General and administrative expenses accounted for 12.1% and 14.0% of our total revenues in the three months ended September 30, 2020 and 2019, respectively.

Our operating loss for the three months ended September 30, 2020 was $1.0 million, compared to $0.6 million during the same period in 2019.

Net loss for the three months ended September 30, 2020 was $1.0 million, or $0.02 per basic and diluted common share, as compared to net loss of $0.7 million for the same period a year ago, or $0.02 per basic and diluted common share. The increase in net loss was mainly due to the increased cost of revenue in this period.

Nine Months Results

Revenue was both $7.9 million for the nine months ended September 30, 2020 and 2019, respectively.

For the nine months ended September 30, 2020, our cost of revenue was $6.5 million, or 82.5% of total revenue, comparing to $6.7 million, or 84.9% of total revenue, in the same period in 2019. The decrease in cost of revenue was mainly due to a foreign trade of COVID-19 testers we completed in the second quarter of 2020 partially offset the increase in cost of revenue.

Gross profit for the nine months ended September 30, 2020 was $1.4 million, compared to $1.2 million in the same period in 2019. Our gross profit margin in the nine months ended September 30, 2020 was 17.5% compared to 15.1% in the same period in 2019. The increase in our gross profit margin was mainly due to a foreign trade of COVID-19 testers we completed in the second quarter of 2020 partially offset the increase in cost of revenue.

Net loss for the nine months ended September 30, 2020 was $1.7 million, or $0.04 per basic and diluted common share, as compared to net loss of $2.0 million, or $0.04 per basic and diluted common share for the nine months ended September 30, 2019. The decrease of net loss was mainly due to a foreign trade of COVID-19 testers we completed in the second quarter of 2020.

Financial Condition

As of September 30, 2020, the Company had cash and cash equivalents of $0.3 million compared to $1.1 million as of December 31, 2019.

Our net accounts receivable was $0.5 million and $0.6 million as of September 30, 2020 and December 31, 2019.

For the nine months ended September 30, 2020, cash flow used in operating activities was $0.4 million, as compared to cash flow provided by operating activities of $0.6 million for the same period in 2019.

About China Pharma Holdings, Inc.

China Pharma Holdings, Inc. is a specialty pharmaceutical company that develops, manufactures and markets a diversified portfolio of products, focusing on conditions with high incidence and high mortality rates in China, including cardiovascular, CNS, infectious, and digestive diseases. The Company's cost-effective business model is driven by market demand and supported by new GMP-certified product lines covering the major dosage forms. In addition, the Company has a broad and expanding nationwide distribution network across all major cities and provinces in China. The Company's wholly-owned subsidiary, Hainan Helpson Medical & Biotechnique Co., Ltd., is located in Haikou City, Hainan Province. For more information about China Pharma Holdings, Inc., please visit www.chinapharmaholdings.com. The Company routinely posts important information on its website.

Safe Harbor Statement

Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties may include, but are not limited to: the achievability of financial guidance; success of new product development; unanticipated changes in product demand; increased competition; downturns in the Chinese economy; uncompetitive levels of research and development; and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations, except as required by applicable law or regulation.

- FINANCIAL TABLES FOLLOW -

CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,	December 31,
	2020	2019
ASSETS
Current Assets:
Cash and cash equivalents	$ 346,611	$ 1,074,979
Restricted cash	-	109,908
Banker's acceptances	38,465	45,756
Trade accounts receivable, less allowance for doubtful
accounts of $17,957,621 and $17,575,100, respectively	535,060	635,371
Other receivables, less allowance for doubtful
accounts of $27,318 and $22,729, respectively	91,389	46,643
Advances to suppliers	106,880	404
Inventory	3,513,570	3,588,824
Prepaid expenses	401,747	77,120
Total Current Assets	5,033,722	5,579,005

Property, plant and equipment, net	15,836,890	16,313,827
Operating lease right of use asset	70,733	136,779
Intangible assets, net	183,545	205,611
TOTAL ASSETS	$ 21,124,890	$ 22,235,222

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable	$ 989,641	$ 1,366,330
Accrued expenses	160,535	189,880
Other payables	3,483,821	3,560,332
Advances from customers	640,103	505,398
Other payables - related parties	2,176,629	2,071,986
Operating lease liability, current portion	73,690	91,306
Current portion of construction loan facility	2,202,611	2,150,168
Current portion of lines of credit	1,827,189	-
Bankers' acceptance notes payable	-	109,908
Total Current Liabilities	11,554,219	10,045,308
Non-current Liabilities:
Construction loan facility	-	2,150,168
Lines of credit, net of current portion	939,781	-
Operating lease liability, net of current portion	-	48,701
Deferred tax liability	771,820	753,444
Total Liabilities	13,265,820	12,997,621
Commitments and Contingencies (Note 13)
Stockholders' Equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized;
no shares issued or outstanding	-	-
Common stock, $0.001 par value; 95,000,000 shares authorized;
43,579,557 shares and 43,579,557 shares issued and outstanding, respectively	43,580	43,580
Additional paid-in capital	23,590,204	23,590,204
Accumulated deficit	(27,630,142)	(25,972,402)
Accumulated other comprehensive income	11,855,428	11,576,219
Total Stockholders' Equity	7,859,070	9,237,601
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 21,124,890	$ 22,235,222

CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	For the Three Months		For the Nine Months
	Ended September 30,		Ended September 30,
	2020	2019	2020	2019
Revenue	$ 2,400,667	$ 2,376,844	$ 7,935,345	$ 7,875,525
Cost of revenue	2,353,471	2,004,085	6,543,912	6,682,688

Gross profit	47,196	372,759	1,391,433	1,192,837

Operating expenses:
Selling expenses	654,090	613,110	1,707,827	1,597,667
General and administrative expenses	290,586	333,833	1,001,590	1,097,200
Research and development expenses	37,628	39,716	116,491	175,642
Bad debt (benefit) expense	17,386	31,304	42,314	54,708
Total operating expenses	999,690	1,017,963	2,868,222	2,925,217

Loss from operations	(952,494)	(645,204)	(1,476,789)	(1,732,380)

Other income (expense):
Interest income	3,665	11,840	5,263	27,216
Interest expense	(61,067)	(67,590)	(186,214)	(251,624)
Net other expense	(57,402)	(55,750)	(180,951)	(224,408)

Loss before income taxes	(1,009,896)	(700,954)	(1,657,740)	(1,956,788)
Income tax expense	-	-	-	-
Net loss	(1,009,896)	(700,954)	(1,657,740)	(1,956,788)
Other comprehensive income - foreign currency
translation adjustment	470,445	(909,889)	279,209	(885,188)
Comprehensive loss	$ (539,451)	$ (1,610,843)	$ (1,378,531)	$ (2,841,976)
Loss per share:
Basic and diluted	$ (0.02)	$ (0.02)	$ (0.04)	$ (0.04)
Weighted average shares outstanding	43,579,557	43,579,557	43,579,557	43,579,557

CHINA PHARMA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Nine Months
	Ended September 30,
	2020	2019
Cash Flows from Operating Activities:
Net loss	$ (1,657,740)	$ (1,956,788)
Depreciation and amortization	1,978,363	2,261,800
Bad debt expense	42,314	54,708
Inventory write off	-	87,542
Changes in assets and liabilities:
Trade accounts and other receivables	(366,385)	(407,733)
Advances to suppliers	(103,701)	(2,980)
Inventory	561,139	1,436,878
Trade accounts payable	(399,363)	130,642
Accrued taxes payable	123,921	23,321
Other payables and accrued expenses	(250,851)	(201,831)
Change in bankers' acceptance notes payable	(109,663)	(773,264)
Advances from customers	119,199	(12,670)
Prepaid expenses	(314,361)	(9,211)
Net Cash (Used in) Provided by Operating Activities	(377,128)	630,414

Cash Flows from Investing Activities:
Purchases of property and equipment	(1,099,878)	(85,739)
Net Cash Used in Investing Activities	(1,099,878)	(85,739)

Cash Flows from Financing Activities:
Proceeds from lines of credit	2,695,087	-
Payments of construction term loan	(2,145,389)	(2,188,463)
Proceeds from related party loan	162,090	674,405
Payments of related party loan	(77,530)	(209,726)
Net Cash Provided by (Used in) Financing Activities	634,258	(1,723,784)

Effect of Exchange Rate Changes on Cash	4,472	(30,604)
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(838,276)	(1,209,713)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	1,184,887	2,460,527
Cash, Cash Equivalents and Restricted Cash at End of Period	$ 346,611	$ 1,250,814

Cash and Cash Equivalents	346,611	761,606
Restricted cash	-	489,208
Cash, Cash Equivalents and Restricted Cash at End of Period	$ 346,611	$ 1,250,814

Supplemental Cash Flow Information:
Cash paid for income taxes	$ -	$ -
Cash paid for interest	$ 176,055	$ 241,465

Supplemental Noncash Investing and Financing Activities:
Issuance of banker's acceptances	$ -	$ 2,641
Accounts receivable collected with banker's acceptances	394,393	532,537
Inventory purchased with banker's acceptances	402,582	553,183
Right-of-use assets obtained in exchange for operating lease obligations	-	231,130