China Pharma Holdings, Inc. Reports Fiscal Year 2019 Financial Results
HAIKOU CITY, China, March 31, 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 fiscal year ended December 31, 2019.
Full Year Highlights
-- Revenue decreased 11.4% to $11.0 million in fiscal year 2019 from $12.3 million in fiscal year 2018; -- Gross margin was 13.6% in fiscal year 2019, compared to 16.0% in fiscal year 2018. -- Impairment loss was $17.0 million in fiscal year 2019 compared to $6.5 million in fiscal year 2018, which represented an increase of $10.5 million; -- Loss from operations was $20.4 million in fiscal year 2019 compared to $10.4 million in fiscal year 2018, which represented an increase of $10.0 million; -- Net loss was $20.7 million in fiscal year 2019 compared to $10.8 million in fiscal year 2018. Loss per common share was $0.48 per basic and diluted share in fiscal year 2019 compared with $0.25 per basic and diluted share in fiscal year 2018.
Ms. Zhilin Li, China Pharma's Chairman and CEO, commented, "In 2019, we were continuously influenced by the policies and market environment of the pharmaceutical industry in China. In particular, the various cost control related policies in connection with the healthcare insurance, Group Purchasing Organization ("GPO", a new drug purchasing practice in which the anticipated purchase volume will be announced in the tender announcement, and the suppliers will need to consider their manufacturing capacity in addition to the price) activities, consistency evaluation, and control of the percentage of drug expenditure among the total hospital expenditure. After evaluating the detailed rules of those major policies and considering the potential return of investment and our recent cash flow position, we have made the decision to impair all advances for our remaining four pipeline products in 2019. However, we may resume the development of these formulas in the future if sufficient funding and other favorable conditions arise." Ms. Li continued, "Nevertheless, we continue to explore in the field of comprehensive healthcare. Comprehensive healthcare focuses on people's daily life, aging and disease and pays attention to all kinds of risk factors and misunderstandings affecting health. We launched a wash-free sanitizer in early 2020 to address the market needs caused by COVID-19 in China. 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."
Full Year Results
Revenue decreased by 11.4% to $11.0 million for the year ended December 31, 2019, as compared to $12.3 million for the year ended December 31, 2018. This decrease in sales revenue was mainly due to the increased standards of drug tender procurement of GPO (drugs have to pass the consistency evaluation in order to participate in the GPO), and the decreased "drug ratio"(the ratio of drug expenditure to patients' total hospital expenditure) from 60% a few years ago to approximately 30% in 2019, which were promoted by the healthcare insurance cost control policy.
Gross profit for the year ended December 31, 2019 was $1.5 million, compared to $2.0 million in 2018. Our gross profit margin in 2019 was 13.6% compared to 16.0% in 2018. This decline in our gross profit margin was mainly due to a decrease in our sales but our fixed costs remained the same.
Our selling expenses for the year ended December 31, 2019 were $2.4 million, a decrease of $0.9 million compared to $3.2 million for the year ended December 31, 2018. Selling expenses accounted for 21.5% of the total revenue in 2019 compared to 26.1% in 2018.
Our general and administrative expenses for the year ended December 31, 2019 were $2.3 million, as compared to $1.9 million in 2018. General and administrative expenses accounted for 21.0% and 15.8% of our total revenues in 2019 and 2018, respectively.
Our bad debt expenses for the year ended December 31, 2019 was $0.003 million, which represented a decrease of $0.601 million compared to $0.604 million in 2018. The decrease in our bad debt expenses was mainly due to the Company's adjustment of its credit policies to customers and the request of more advanced payment from customers prior to the shipping of products for the year ended December 31, 2019 compared to December 31, 2018.
We recognized $17.02 million impairment loss for the year ended December 31, 2019, compared to $6.48 million in 2018, among which, there was an impairment loss for the advances made to laboratories for the years ended December 31, 2019 and 2018 in the amount of $17,015,117 and $6,134,271, respectively. As a pharmaceutical company, we have been focusing on the development and maintenance of our intangible assets, mainly in the form of medical formulas. The consistency evaluation is expected to have a significant impact on all generic products not only in our pipeline, but also throughout the existing Chinese market. After evaluating the detailed rules under this policy and considering the return of investment and our recent cash flow position, our management made certain assessments regarding the impairment of our intangible assets, and identified four and two formulas that were unlikely to generate positive cash flow in the foreseeable future and therefore recognized impairment loss on them accordingly as of December 31, 2019 and December 31, 2018, respectively. The management determined to impair all advances at December 31, 2019, but may resume the development of these formulas in the future if sufficient funding and other favorable conditions arise.
Net loss for year ended December 31, 2019 was $20.7 million, or $0.48 each basic and diluted share, compared to net loss of $10.8 million, or net loss of $0.25 each basic and diluted share, for the year ended December 31, 2018. The increase in net loss was mainly a result of the decrease in impairment of long term assets.
Financial Condition
As of December 31, 2019 the Company had cash and cash equivalents of $1.1 million compared to $1.2 million as of December 31, 2018. Consider using "Working capital deficit increased to $4.5 million as of December 31, 2019 from $1.3 million as of December 31, 2018.
As of December 31, 2019, our net accounts receivable was $0.6 million, compared to $0.9 million as of December 31, 2018.
For the year ended December 31, 2019, cash flow from operating activities was $0.6 million, as compared to $1.9 million in 2018.
Conference Call
The Company will hold a conference call at 8:30 am E.T. on March 31, 2020 to discuss the results of full year 2019. Listeners may access the call by dialing 1-866-519-4004 or 65-671-350-90 for international callers, Conference ID # 9565497. A replay of the call will be accessible through April 7, 2020 by dialing 1-855-452-5696 or 61-281-990-299 for international callers, Conference ID # 9565497.
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. CONSOLIDATED BALANCE SHEETS December 31, December 31, 2019 2018 ASSETS Current Assets: Cash and cash equivalents $1,074,979 $1,186,587 Restricted cash 109,908 1,273,940 Banker's acceptances 45,756 20,579 Trade accounts receivable, less allowance for doubtful accounts of $17,575,100 and $17,815,075, respectively 635,371 916,931 Other receivables, less allowance for doubtful accounts of $22,729 and $34,884, respectively 46,643 170,098 Advances to suppliers 404 47 Inventory 3,588,824 5,054,975 Prepaid expenses 77,120 123,759 Total Current Assets 5,579,005 8,746,916 Advances for purchases of intangible assets 17,069,587 Property, plant and equipment, net 16,313,827 19,294,379 Operating lease right of use asset 136,779 Intangible assets, net 205,611 266,443 TOTAL ASSETS $22,235,222 $45,377,325 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Trade accounts payable $1,366,330 $1,060,934 Accrued expenses 189,880 310,804 Other payables 3,560,332 3,065,508 Advances from customers 505,398 525,647 Other payables - related parties 2,071,986 1,633,263 Operating lease liability, current portion 91,306 Current portion of construction loan facility 2,150,168 2,181,360 Bankers' acceptance notes payable 109,908 1,273,940 Total Current Liabilities 10,045,308 10,051,456 Non-current Liabilities: Construction loan facility 2,150,168 4,362,720 Operating lease liability, net of current portion 48,701 Deferred tax liability 753,444 764,374 Total Liabilities 12,997,621 15,178,550 Commitments and Contingencies (Note 9) 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 Retained (deficit) earnings (25,972,402) (5,270,358) Accumulated other comprehensive income 11,576,219 11,835,349 Total Stockholders' Equity 9,237,601 30,198,775 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $22,235,222 $45,377,325
CHINA PHARMA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) For the Years Ended December 31, 2019 2018 Revenue $10,923,936 $12,330,687 Cost of revenue 9,441,752 10,355,839 Gross profit 1,482,184 1,974,848 Operating expenses: Selling expenses 2,352,610 3,216,512 General and administrative expenses 2,289,520 1,949,921 Research and development expenses 229,637 172,384 Bad debt expense 3,153 604,388 Impairment loss 17,015,117 6,479,057 Total operating expenses 21,890,037 12,422,262 Loss from operations (20,407,853) (10,447,414) Other income (expense): Interest income 27,527 38,516 Interest expense (321,718) (451,258) Net other expense (294,191) (412,742) Loss before income taxes (20,702,044) (10,860,156) Income tax benefit 109,989 Net loss (20,702,044) (10,750,167) Other comprehensive income - foreign currency translation adjustment (259,130) (2,122,360) Comprehensive income (loss) $(20,961,174) $(12,872,527) Loss per share: Basic and diluted $(0.48) $(0.25) Weighted average shares outstanding 43,579,557 43,579,557
CHINA PHARMA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2019 2018 Cash Flows from Operating Activities: Net loss $(20,702,044) $(10,750,167) Depreciation and amortization 2,928,799 3,258,739 Inventory write off 253,465 954,311 Bad debt expense 3,153 604,388 Deferred income taxes 68,419 Impairment loss 17,015,117 6,479,057 Changes in assets and liabilities: Trade accounts and other receivables (478,918) 99,400 Advances to suppliers (361) (449,101) Inventory 1,999,978 688,852 Trade accounts payable 324,180 (16,441) Accrued taxes payable 12,971 (147,099) Other payables and accrued expenses 378,200 437,901 Change in bankers' acceptance notes payable (1,158,728) 625,128 Advances from customers (12,875) (25,127) Prepaid expenses 45,375 53,860 Net Cash Provided by Operating Activities 608,312 1,882,120 Cash Flows from Investing Activities: Purchases of property and equipment (136,003) (51,145) Net Cash Used in Investing Activities (136,003) (51,145) Cash Flows from Financing Activities: Payments of construction term loan (2,174,399) (2,263,877) Advances from related party 691,459 287,423 Repayments to related party (245,830) Net Cash Used in Financing Activities (1,728,770) (1,976,454) Effect of Exchange Rate Changes on Cash (19,179) (134,004) Net Decrease in Cash, Cash Equivalents and Restricted Cash (1,275,640) (279,483) Cash and Cash Equivalents at Beginning of Period 2,460,527 2,740,010 Cash, Cash Equivalents and Restricted Cash at End of Period $1,184,887 $2,460,527 Cash and Cash Equivalents 1,074,979 1,186,587 Restricted cash 109,908 1,273,940 Cash, Cash Equivalents and Restricted Cash at End of Period 1,184,887 2,460,527 Supplemental Cash Flow Information: Cash paid for income taxes $ - $ - Cash paid for interest $299,164 $588,191 Supplemental Noncash Investing and Financing Activities: Accounts receivable collected with banker's acceptances 869,625 579,896 Inventory purchased with banker's acceptances 843,867 597,686 Right-of-use assets obtained in exchange for operating lease obligations 229,644
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SOURCE China Pharma Holdings, Inc.