China Pharma Holdings, Inc. Reports Second Quarter 2019 Financial Results

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Aug 15, 2019, 06:30 ET

HAIKOU, China, Aug. 15, 2019 /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 June 30, 2019.

Second Quarter Highlights

Revenue decreased 19.0% to $2.6 million in the second quarter 2019 from $3.2 million in the same period of 2018;
Gross margin was 6.4% in the second quarter 2019, compared to 18.3% in the same period of 2018;
Loss from operations was $0.8 million in the second quarter 2019 compared to $0.9 million in the same period of 2018, an improvement of $0.1 million;
Net loss was $0.8 million in the second quarter 2019 compared to $1.0 million in the same period of 2018. Loss per common share was both $0.02 per basic and diluted share in the second quarter 2019 and 2018, respectively.

Ms. Zhilin Li, China Pharma's Chairman and CEO, commented, "We experienced negative impacts on our sales from the strict implementation of the government policy of controlling the proportion of the spending on drugs to the patients' total expenditures in hospitals. Management endeavors to vigorously promote sales through active participation in recent provincial market openings to solicit new drug tender offers and allow China Pharma to expand its presence in these markets." Ms. Li continued, "In addition, we are experiencing sustained pressure from the more stringent requirements of drug registration standards, consistency evaluations and challenging environment in our industry in this period. We will continue actively adapting to the state policy guidance and further evaluating market conditions for our current existing products, pipeline products, and competition in the market, in order to optimize our development strategy. Simultaneously, we will also actively implement the launch of our nutrition product."

Second Quarter Results

Revenue decreased by 19.0% to $2.6 million for the three months ended June 30, 2019, as compared to $3.2 million for the three months ended June 30, 2018. This decrease was mainly due to the market reaction caused by the strict implementation of the policy on controlling the percentage of spending on medicines to patients' total expenditure in hospitals.

Gross profit for the three months ended June 30, 2019 was $0.2 million, as compared to $0.6 million during the same period in 2018. Our gross profit margin in the three months ended June 30, 2019 was 6.4% as compared to 18.3% during the same period in 2018. The decrease in our gross profit margin was mainly due to the decrease in revenue and the increased ratio of fixed cost to revenue.

Our selling expenses for the three months ended June 30, 2019 and 2018 were $0.5 million and $0.7 million, respectively. Selling expenses accounted for 19.7% of the total revenue in the three months ended June 30, 2019, as compared to 22.6% during the same period in 2018. Because of adjustments in our sales practices, and reform of healthcare policies, we reduced the number of our personnel and expenses to efficiently support our sales and the collection of accounts receivable.

Our general and administrative expenses for the three months ended June 30, 2019 were $0.3 million, as compared to $0.4 million for the same period in 2018. General and administrative expenses accounted for 13.0% and 11.1% of our total revenues in the three months ended June 30, 2019 and 2018, respectively.

Our research and development expenses for the three months ended June 30, 2019 were $0.07 million, as compared to $0.02 million in the same period in 2018. Research and development expenses accounted for 2.6% and 0.7% of our total revenues in the three months ended June 30, 2019 and 2018, respectively. The increase in research and development expenses in this period was mainly due to the spending on the consistency evaluation of our current existing products.

Our bad debt expenses for the three months ended June 30, 2019 were $10,092, as compared to $350,847 for the same period in 2018.

Net loss for the three months ended June 30, 2019 was $0.8 million, or $0.02 per basic and diluted common share, as compared to a net loss of $1.0 million for the same period a year ago, or $0.02 per basic and diluted common share. The decrease in net loss was mainly the result of controls on expenditures outweighed the impact of decrease in revenue.

Six Months Results

Revenue decreased by 19.0% to $5.5 million for the six months ended June 30, 2019, as compared to $6.8 million for the six months ended June 30, 2018. This decrease was mainly due to the implementation of government policies on "controlling the percentage of medicine spending on total hospital expenditure" in recent quarters.

Gross profit for the six months ended June 30, 2019 was $0.8 million, compared to $1.6 million in the same period in 2018. Our gross profit margin in the six months ended June 30, 2019 was 14.9% compared to 24.1% in the same period in 2018. The decrease in our gross profit margin was mainly due to the decrease in sales in the first half of 2019. Although cost decreased in this period as well, the stable nature of fixed cost deteriorates the gross margin when the decrease in revenue outweighed that of cost.

Net loss for the six months ended both June 30, 2019 and 2018 was $1.3 million, or $0.03 per basic and diluted common share. This reflected the offset of decreased revenue to decreased expenses in the six months ended June 30, 2019.

Financial Condition

As of June 30, 2019, the Company had cash and cash equivalents of $1.7 million compared to $1.2 million as of December 31, 2018.

As of June 30, 2019, our net accounts receivable was $0.7 million, compared to $0.9 million as of December 31, 2018.

For the six months ended June 30, 2019, cash flow from operating activities was $0.9 million, as compared to $0.1 million for the same period in 2018.

Conference Call

The Company will hold a conference call at 8:30 am E.T. on August 15, 2019 to discuss the results of the second quarter 2019. Listeners may access the call by dialing 1-866-519-4004 or 65-671-350-90 for international callers, Conference ID # 5176357. A replay of the call will be accessible through August 23, 2019 by dialing 1-855-452-5696 or 61-281-990-299 for international callers, Conference ID # 5176357.

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 & Biotechnology 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)

	June 30,	December 31,
	2019	2018
ASSETS
Current Assets:
Cash and cash equivalents	$ 1,655,892	$ 1,186,587
Restricted cash	503,312	1,273,940
Banker's acceptances	-	20,579
Trade accounts receivable, less allowance for doubtful
accounts of $17,837,014 and $17,815,075, respectively	680,136	916,931
Other receivables, less allowance for doubtful
accounts of $40,555 and $34,884, respectively	290,914	170,098
Advances to suppliers	10,517	47
Inventory	4,392,426	5,054,975
Prepaid expenses	154,672	123,759
Total Current Assets	7,687,869	8,746,916

Advances for purchases of intangible assets	17,073,915	17,069,587
Property, plant and equipment, net	17,857,438	19,294,379
Operating lease right of use asset	184,618	-
Intangible assets, net	226,530	266,443
TOTAL ASSETS	$ 43,030,370	$ 45,377,325

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable	$ 1,281,712	$ 1,060,934
Accrued expenses	105,490	310,804
Other payables	2,861,123	3,065,508
Advances from customers	556,897	525,647
Other payables - related parties	1,402,567	1,633,263
Operating lease liability, current portion	90,483	-
Current portion of construction loan facility	2,181,913	2,181,360
Bankers' acceptance notes payable	503,312	1,273,940
Total Current Liabilities	8,983,497	10,051,456
Non-current Liabilities:
Construction loan facility	4,218,366	4,362,720
Operating lease liability, net of current portion	96,297	-
Deferred tax liability	764,568	764,374
Total Liabilities	14,062,728	15,178,550
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 outstanding, respectively	43,580	43,580
Additional paid-in capital	23,590,204	23,590,204
Accumulated deficit	(6,526,192)	(5,270,358)
Accumulated other comprehensive income	11,860,050	11,835,349
Total Stockholders' Equity	28,967,642	30,198,775
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 43,030,370	$ 45,377,325

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

	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
	2019	2018	2019	2018
Revenue	$ 2,569,408	$ 3,173,711	$ 5,498,681	$ 6,789,395
Cost of revenue	2,405,860	2,594,230	4,678,603	5,156,214

Gross profit	163,548	579,481	820,078	1,633,181

Operating expenses:
Selling expenses	505,866	716,220	984,557	1,394,550
General and administrative expenses	334,550	353,143	763,367	845,153
Research and development expenses	66,008	23,674	135,926	45,887
Bad debt expense	10,092	350,847	23,404	352,681
Total operating expenses	916,516	1,443,884	1,907,254	2,638,271

Loss from operations	(752,968)	(864,403)	(1,087,176)	(1,005,090)

Other income (expense):
Interest income	12,119	9,524	15,376	11,818
Interest expense	(97,254)	(130,580)	(184,034)	(259,682)
Net other expense	(85,135)	(121,056)	(168,658)	(247,864)

Loss before income taxes	(838,103)	(985,459)	(1,255,834)	(1,252,954)
Income tax expense	-	(22,590)	-	(48,575)
Net loss	(838,103)	(1,008,049)	(1,255,834)	(1,301,529)
Other comprehensive income - foreign currency
translation adjustment	(811,164)	(2,418,783)	24,701	(744,707)
Comprehensive loss	$ (1,649,267)	$ (3,426,832)	$ (1,231,133)	$ (2,046,236)
Loss per share:
Basic and diluted	$ (0.02)	$ (0.02)	$ (0.03)	$ (0.03)
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 Six Months
	Ended June 30,
	2019	2018
Cash Flows from Operating Activities:
Net loss	$ (1,255,834)	$ (1,301,529)
Depreciation and amortization	1,575,870	1,714,328
Bad debt expense	23,404	352,681
Deferred income taxes	-	48,575
Non cash lease expense	2,191	-
Changes in assets and liabilities:
Trade accounts and other receivables	(284,126)	(767,978)
Advances to suppliers	(10,615)	113,520
Inventory	1,072,479	206,415
Trade accounts payable	223,562	35,235
Accrued taxes payable	(43,632)	(94,416)
Other payables and accrued expenses	(371,738)	(157,893)
Advances from customers	31,548	15,639
Prepaid expenses	(31,309)	(40,178)
Net Cash Provided by Operating Activities	931,800	124,399

Cash Flows from Investing Activities:
Purchases of property and equipment	(73,538)	(29,982)
Net Cash Used in Investing Activities	(73,538)	(29,982)

Cash Flows from Financing Activities:
Payments of construction term loan	(147,475)	(157,071)
Payments of related party payables	(231,252)	-
Net Cash Used in Financing Activities	(378,727)	(157,071)

Effect of Exchange Rate Changes on Cash	(10,230)	(32,033)
Net (Decrease) Increase in Cash and Cash Equivalents	469,305	(94,687)
Cash and Cash Equivalents at Beginning of Period	1,186,587	2,030,214
Cash and Cash Equivalents at End of Period	$ 1,655,892	$ 1,935,527

Supplemental Cash Flow Information:
Cash paid for income taxes	$ -	$ -
Cash paid for interest	$ 178,991	$ 259,682

Supplemental Noncash Investing and Financing Activities:
Issuance of banker's acceptances	$ -	$ 965,468
Accounts receivable collected with banker's acceptances	378,585	268,630
Inventory purchased with banker's acceptances	399,455	288,982
Right-of-use assets obtained in exchange for operating lease obligations	233,629	-