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